EX-10.6 7 biol-ex106_132.htm EX-10.6 biol-ex106_132.htm

 

Exhibit 10.6

 

Execution Version

 

 

 

 

 

 

 

 

 

 

CREDIT AGREEMENT

among BIOLASE, INC.,

as Borrower,

 

SWK FUNDING LLC,

as Agent, Sole Lead Arranger and Sole Bookrunner, and

the financial institutions party hereto from time to time as Lenders

 

 

Dated as of November 9, 2018

 

 

 

 

 

[Biolase] Credit Agreement #61304369

 


 

Table of Contents

Page

 

Section 1Definitions; Interpretation.1

 

1.1

Definitions1

 

1.2

Interpretation15

Section 2Credit Facility16

 

2.1

Term Loan Commitments16

 

2.2

Loan Procedures17

 

2.3

Commitments Several17

 

2.4

Indebtedness Absolute; No Offset; Waiver17

 

2.5

Loan Accounting18

 

2.5.1

Recordkeeping18

 

2.5.2

Notes18

 

2.6

Payment of Interest18

 

2.6.1

Interest Rates18

 

2.6.2

Payments of Interest and Principal19

 

2.7

Fees19

 

2.8

Prepayment20

 

2.8.1

Mandatory Prepayment20

 

2.8.2

Voluntary Prepayment20

 

2.8.3

Change of Control20

 

2.9

Repayment of Term Loan21

 

2.9.1

Revenue-Based Payment21

 

2.9.2

Principal23

 

2.10

Payment23

 

2.10.1

Making of Payments23

 

2.10.2

Application of Payments and Proceeds23

 

2.10.3

Set-off23

 

2.10.4

Proration of Payments23

Section 3Yield Protection24

 

3.1

Taxes24

 

3.2

Increased Cost26

 

3.3

Funding Losses27

 

3.4

Manner of Funding; Alternate Funding Offices27

 

3.5

Conclusiveness of Statements; Survival28

Section 4Conditions Precedent.28

 

4.1

Prior Debt28

 

4.2

Delivery of Loan Documents28

 

4.3

Fees29

 

4.4

Closing Date Warrant29

 

4.5

Representations, Warranties,  Defaults29

 

4.6

Reserved30

 

4.7

Reserved30

 

4.8

Reserved30

 

4.9

No Material Adverse Effect30

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Section 5Representations and Warranties.30

 

5.1

Organization30

 

5.2

Authorization; No Conflict30

 

5.3

Validity; Binding Nature30

 

5.4

Financial Condition31

 

5.5

No Material Adverse Change31

 

5.6

Litigation31

 

5.7

Ownership of Properties; Liens31

 

5.8

Capitalization31

 

5.9

Pension Plans32

 

5.10

Investment Company Act32

 

5.11

No Default32

 

5.12

Margin Stock32

 

5.13

Taxes32

 

5.14

Solvency32

 

5.15

Environmental Matters33

 

5.16

Insurance33

 

5.17

Information33

 

5.18

Intellectual Property; Products and Services33

 

5.19

Restrictive Provisions34

 

5.20

Labor Matters34

 

5.21

Material Contracts35

 

5.22

Compliance with Laws; Health Care Laws35

 

5.23

Existing Indebtedness; Investments, Guarantees and Certain Contracts36

 

5.24

Affiliated Agreements36

 

5.25

Names; Locations of Offices, Records and Collateral; Deposit Accounts37

 

5.26

Non-Subordination37

 

5.27

Reserved37

 

5.28

Anti-Terrorism; OFAC37

 

5.29

Security Interest37

 

5.30

Survival38

Section 6Affirmative Covenants.38

 

6.1

Information38

 

6.1.1

Annual Report38

 

6.1.2

Interim Reports38

 

6.1.3

Revenue-Based Payment Reconciliation39

 

6.1.4

Compliance Certificate39

 

6.1.5

Reports to Governmental Authorities and Shareholders39

 

6.1.6

Notice of Default; Litigation39

 

6.1.7

Management Report40

 

6.1.8

Projections41

 

6.1.9

Updated Schedules to Guarantee and Collateral Agreement41

 

6.1.10

Other Information41

 

6.2

Books; Records; Inspections41

 

6.3

Conduct of Business; Maintenance of Property; Insurance42

 

6.4

Compliance with Laws; Payment of Taxes and Liabilities43

 

6.5

Maintenance of Existence44

 

6.6

Employee Benefit Plans44

 

6.7

Environmental Matters44

 

6.8

Further Assurances44

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6.9

Compliance with Health Care Laws45

 

6.10

Cure of Violations46

 

6.11

Corporate Compliance Program46

 

6.12

Payment of Debt46

 

6.13

Board Observation47

 

6.14

Post-Closing Covenant47

Section 7Negative Covenants.47

 

7.1

Debt48

 

7.2

Liens49

 

7.3

Dividends; Redemption of Equity Interests51

 

7.4

Mergers; Consolidations; Asset Sales52

 

7.5

Modification of Organizational Documents53

 

7.6

Use of Proceeds53

 

7.7

Transactions with Affiliates53

 

7.8

Inconsistent Agreements54

 

7.9

Business Activities54

 

7.10

Investments54

 

7.11

Restriction of Amendments to Certain Documents55

 

7.12

Fiscal Year55

 

7.13

Financial Covenants56

 

7.13.1

Consolidated Unencumbered Liquid Assets56

 

7.13.2

Minimum Aggregate Revenue56

 

7.13.3

Minimum EBITDA57

 

7.14

Deposit Accounts58

 

7.15

Subsidiaries58

 

7.16

Regulatory Matters58

 

7.17

Name; Permits; Dissolution; Insurance Policies; Disposition of Collateral; Taxes;

Trade Names59

Section 8Events of Default; Remedies.59

 

8.1

Events of Default59

 

8.1.1

Non-Payment of Credit59

 

8.1.2

Default Under Other Debt59

 

8.1.3

Bankruptcy; Insolvency59

 

8.1.4

Non-Compliance with Loan Documents60

 

8.1.5

Representations; Warranties60

 

8.1.6

Pension Plans60

 

8.1.7

Judgments60

 

8.1.8

Invalidity of Loan Documents or Liens61

 

8.1.9

Invalidity of Subordination Provisions61

 

8.1.10

Change of Control61

 

8.1.11

Certificate Withdrawals, Adverse Test or Audit Results, and Other Matters

............................................................................................................... 61

 

8.1.12

Reserved62

 

8.2

Remedies62

Section 9Agent.63

 

9.1

Appointment; Authorization63

 

9.2

Delegation of Duties63

 

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9.3

Limited Liability63

 

9.4

Reliance63

 

9.5

Notice of Default64

 

9.6

Credit Decision64

 

9.7

Indemnification64

 

9.8

Agent Individually65

 

9.9

Successor Agent65

 

9.10

Collateral and Guarantee Matters65

 

9.11

Intercreditor Agreements66

 

9.12

Actions in Concert66

Section 10Miscellaneous.66

 

10.1

Waiver; Amendments66

 

10.2

Notices67

 

10.3

Computations68

 

10.4

Costs; Expenses68

 

10.5

Indemnification by Borrower68

 

10.6

Marshaling; Payments Set Aside69

 

10.7

Nonliability of Lenders70

 

10.8

Assignments70

10.8.1   Assignments70

 

10.9

Participations71

 

10.10

Confidentiality72

 

10.11

Captions73

 

10.12

Nature of Remedies73

 

10.13

Counterparts73

 

10.14

Severability73

 

10.15

Entire Agreement73

 

10.16

Successors; Assigns74

 

10.17

Governing Law74

 

10.18

Forum Selection; Consent to Jurisdiction74

 

10.19

Waiver of Jury Trial74

 

10.20

Patriot Act75

 

10.21

Independent Nature of Relationship75

 

10.22

Approved AR Loan Facility75

 

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Annexes

 

Annex ICommitments and Pro Rata Term Loan Shares

Annex IIAddresses

 

 

Exhibits

 

Exhibit AForm of Assignment Agreement

Exhibit BForm of Compliance Certificate

Exhibit CForm of Note Schedules

Schedule 1.1Pending Acquisitions as of the Closing Date

Schedule 4.1Prior Debt

Schedule 5.1Jurisdictions of Qualification

Schedule 5.7Ownership of Properties; Liens

Schedule 5.8Capitalization

Schedule 5.16Insurance

Schedule 5.18(a)Borrower’s Registered Intellectual Property Schedule 5.18(b)Products and Services

Schedule 5.21Material Contracts

Schedule 5.25ANames

Schedule 5.25BOffices

Schedule 7.1Existing Debt

Schedule 7.2Existing Liens

Schedule 7.7Transactions with Affiliates

Schedule 7.10Existing Investments Schedule 7.11Restricted Material Contracts Schedule 7.14Deposit Accounts

 

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CREDIT AGREEMENT

 

This CREDIT AGREEMENT (as may be amended, restated, supplemented, or otherwise modified from time to time, this “Agreement”) dated as of November 9, 2018 (the “Closing Date”), among BIOLASE, INC., a Delaware corporation (“Borrower”), the financial institutions party hereto from time to time as lenders (each a “Lender” and collectively, the “Lenders”) and SWK FUNDING LLC (in its individual capacity, “SWK”), as Agent for all Lenders.

 

In consideration of the mutual agreements herein contained, the parties hereto agree as follows: Section 1Definitions; Interpretation.

 

1.1

Definitions.

 

When used herein the following terms shall have the following meanings:

 

Account Control Agreement means, individually and collectively, any account control or similar agreement(s) entered into from time to time at Agent’s request, among a Loan Party, Agent and any third party bank or financial institution at which such Loan Party maintains a Deposit Account.

 

Acquisition means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of all or substantially all of any business or division of a Person, (b) the acquisition of in excess of fifty percent (50%) of the capital stock, partnership interests, membership interests or equity of any Person, or otherwise causing any Person to become a Subsidiary, (c) the acquisition of a product license or a product line (excluding, for purposes of Section 7.10 hereof, any pending Acquisitions as of the Closing Date as set forth on Schedule 1.1 hereto), or (d) a merger or consolidation or any other combination (other than a merger, consolidation or combination that effects a Disposition) with another Person (other than a Person that is already a Subsidiary).

 

Affiliate of any Person means (a) any other Person which, directly or indirectly, controls or is controlled by or is under common control with such Person, (b) any employee, manager, officer or director of such Person and (c) with respect to any Lender, any entity administered or managed by such Lender or an Affiliate or investment advisor thereof which is engaged in making, purchasing, holding or otherwise investing in commercial loans; provided, however, that notwithstanding anything to the contrary herein, the Investors are not Affiliates for purposes of this Agreement.

 

Agent means SWK in its capacity as administrative and collateral agent for all Lenders hereunder and any permitted successor thereto in such capacity.

 

Aggregate Revenue shall have the meaning set forth in Section 2.9.1(a).

 

Agreement shall have the meaning set forth in the Preamble.

 

Approved AR Loan Facility shall have the meaning set forth in Section 10.22.

 

Approved Fund means (a) any fund, trust or similar entity that invests in commercial loans in the ordinary course of business and is advised or managed by (i) a Lender, (ii) an Affiliate of a Lender, (iii) the same investment advisor that manages a Lender or (iv) an Affiliate of an investment advisor that manages a Lender or (b) any finance company, insurance company or other financial institution which temporarily warehouses loans for any Lender or any Person described in clause (a) above.

 

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Assignment Agreement means an agreement substantially in the form of Exhibit A.

 

Authorization shall have the meaning set forth in Section 5.22(b).

 

Borrower shall have the meaning set forth in the Preamble.

 

Business Day means any day on which commercial banks are open for commercial banking business in Dallas, Texas, and, in the case of a Business Day which relates to the calculation of LIBOR, on which dealings are carried on in the London interbank Eurodollar market.

 

Capital Lease means, with respect to any Person, any lease of (or other agreement conveying the right to use) any real or personal property by such Person that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of such Person; provided that, notwithstanding the foregoing, in no event will any lease that would have been categorized as an operating lease as determined in accordance with GAAP prior to giving effect to the Financial Accounting Standards Board Accounting Standard Update 2016-02, Leases (Topic 842), issued in February 2016, or any other changes in GAAP subsequent to the Closing Date be considered a capital lease for purposes of this Agreement.

 

Cash Equivalent Investment means, at any time, (a) any evidence of Debt, maturing not more than one year after such time, issued or guaranteed by the United States Government or any agency thereof,

(b)commercial paper, or corporate demand notes, in each case (unless issued by a Lender or its holding company) rated at least “A-l” by Standard & Poor’s Ratings Group or “P-l” by Moody’s Investors Service, Inc., (c) any certificate of deposit (or time deposit represented by a certificate of deposit) or banker’s acceptance maturing not more than one year after such time, or any overnight Federal Funds transaction that is issued or sold by any Lender (or by a commercial banking institution that is a member of the Federal Reserve System or is a U.S. branch of a foreign banking institution and has a combined capital and surplus and undivided profits of not less than $500,000,000), (d) any repurchase agreement entered into with any Lender (or commercial banking institution of the nature referred to in clause (c) above) which (i) is secured by a fully perfected security interest in any obligation of the type described in any of clauses (a) through

(c)above and (ii) has a market value at the time such repurchase agreement is entered into of not less than one-hundred percent (100%) of the repurchase obligation of such Lender (or other commercial banking institution) thereunder, (e) money market accounts or mutual funds which invest exclusively or substantially in assets satisfying the foregoing requirements, (f) cash, and (g) other short-term investments utilized by Foreign Subsidiaries in accordance with the normal investment practices for cash management in investments of a type analogous to the foregoing and (h) other short term liquid investments approved in writing by Agent.

 

Change of Control means the occurrence of any of the following, unless such action has been consented to in advance in writing by Agent in its sole discretion:

 

(i)any Person, other than the Permitted Holders, is or becomes the beneficial owner (within the meaning Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of more than fifty-one percent (51%) of the issued and outstanding voting Equity Interests of Borrower;

 

(ii)fifty percent (50%) or more of the members of the Board of Directors (or other applicable governing body) of Borrower on any date shall not have been (x) members of the Board of Directors (or other applicable governing body) of Borrower on the date twelve (12) months prior to such date or (y) approved (by recommendation, nomination, ratification, election or otherwise) by Persons who constitute at least a majority of the members of the Board of Directors

 

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(or other applicable governing body) of Borrower as constituted on the date twelve (12) months prior to such date;

 

(iii)Borrower shall at any time fail to own, directly or indirectly, one hundred percent (100%) of the Equity Interests of each of its Subsidiaries;

 

 

(iv)

a Key Person Event;

 

(v)any “change in/of control” in any document governing Debt of any Loan Party (other than any Loan Documents) in excess of $1,000,000, individually or in the aggregate which gives the holder of such indebtedness the right to accelerate or otherwise require payment of such indebtedness prior to the maturity date thereof; or

 

(vi)the sale of all or substantially all of the assets of Borrower and its Subsidiaries or any merger, consolidation or acquisition by Borrower or any of its Subsidiaries which does not result in such Person being the sole surviving entity or otherwise permitted in Section 7.4(a).

 

Closing Date shall have the meaning set forth in the Preamble.

 

Closing Date Warrant means that certain warrant issued to SWK Funding LLC by Borrower on the Closing Date.

 

CMS means the Centers for Medicare and Medicaid Services of the United States of America.

 

COC Prepayment Fee has the meaning set forth in Section 2.8.3.

 

Collateral has the meaning set forth in the Guarantee and Collateral Agreement.

 

Collateral Access Agreement means an agreement in form and substance reasonably satisfactory to Agent pursuant to which a mortgagee or lessor of real property on which Collateral (or any books and records) is stored or otherwise located, or a warehouseman, processor or other bailee of Inventory or other property owned by any Loan Party, acknowledges the Liens of Agent and waives (or, if approved by Agent, subordinates) any Liens held by such Person on such property, and, in the case of any such agreement with a mortgagee or lessor, permits Agent reasonable access to any Collateral stored or otherwise located thereon.

 

Collateral Documents means, collectively, the Guarantee and Collateral Agreement, the IP Security Agreement, each Collateral Access Agreement, any mortgage delivered in connection with the Loan from time to time, each Account Control Agreement and each other agreement or instrument pursuant to or in connection with which any Loan Party or any other Person grants a Lien in any Collateral to Agent for the benefit of Agent and Lenders, each as amended, restated or otherwise modified from time to time.

 

Commitment means, as to any Lender, such Lender’s Pro Rata Term Loan Share.

 

Compliance Certificate means a certificate substantially in the form of Exhibit B.

 

Consolidated Net Income means, with respect to any Person and its Subsidiaries, for any period, the consolidated net income (or loss) of such Person and its respective Subsidiaries for such period, as determined under GAAP.

 

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Consolidated Unencumbered Liquid Assets means as of any date of determination (i) any Cash Equivalent Investment owned by Borrower and its Subsidiaries on a consolidated basis which are not the subject of any Lien or other arrangement with any creditor to have its claim satisfied out of the asset (or proceeds thereof) prior to the general creditors of Borrower and such Subsidiaries other than the Lien for the benefit of Agent and Lenders and any Liens granted to the lenders under the Approved AR Loan Facility, minus (ii) the aggregate amount of Borrower’s accounts payable under GAAP that are ninety (90) days or more past due the invoice date for such accounts payable.

 

Contingent Obligation means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to or otherwise to invest in a debtor, or otherwise to assure a creditor against loss) any indebtedness, obligation or other liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The amount of any Person’s obligation in respect of any Contingent Obligation shall be deemed to be the amount for which the Person obligated thereon is reasonably expected to be liable or responsible.

 

Contract Rate means a rate per annum equal to (x) the LIBOR Rate, plus (y) ten percent (10.00%).

 

Control has the meaning set forth in Section 6.4.

 

Controlled Group means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with a Loan Party, are treated as a single employer under Section 414 of the IRC or Section 4001 of ERISA.

 

Copyrights shall mean all of each Loan Party’s (or if referring to another Person, such other Person’s) now existing or hereafter acquired right, title, and interest in and to: (i) copyrights, rights and interests in copyrights, works protectable by copyright, all applications, registrations and recordings relating to the foregoing as may at any time be filed in the United States Copyright Office or in any similar office or agency of the United States, any state thereof or any political subdivision thereof, or in any other country, and all research and development relating to the foregoing; and (ii) all renewals of any of the foregoing.

 

Debt of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all indebtedness evidenced by bonds, debentures, notes or similar instruments to the extent the same would appear as a liability (excluding footnotes) in accordance with GAAP, (c) all obligations of such Person as lessee under Capital Leases which have been or should be recorded as liabilities on a balance sheet of such Person in accordance with GAAP, (d) all obligations of such Person to pay the deferred purchase price of property or services (excluding trade accounts, accrued expenses, current accounts and similar obligations payable in the ordinary course of business (including on an intercompany basis)), other than royalty payments or milestone payments made or to be made by such Person from time to time in connection with an Acquisition, (e) all indebtedness secured by a Lien on the property of such Person, whether or not such indebtedness shall have been assumed by such Person (with the amount thereof being measured as the lesser of (x) the aggregate unpaid amount of such indebtedness and (y) the fair market value of such property), (f) all reimbursement obligations, contingent or otherwise, with respect to the face amount of letters of credit (whether or not drawn), banker’s acceptances and surety bonds issued for the account of such Person, other than obligations that relate to trade accounts payable in the ordinary course of business, (g) all net Hedging Obligations of such Person, (h) all Contingent Obligations of such Person in respect of Debt referred to in clauses (a) through (g) above and clause (i) below, in each case, of others,

(i) all indebtedness of any partnership of which such Person is a general partner except to the extent such Person is not liable for such Debt, and (j) all obligations of such Person under any synthetic lease

 

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transaction, where such obligations are considered borrowed money indebtedness for tax purposes but the transaction is classified as an operating lease in accordance with GAAP. For the avoidance of doubt, notwithstanding anything to the contrary set forth herein, intercompany advances in the ordinary course of business in respect of operating costs (such as cash management obligations, royalty fees and transfer pricing) shall not constitute Debt.

 

Debtor Relief Law means, collectively: (a) Title 11 of the United States Code, 11 U.S.C. § 101 et. seq., as amended from time to time, and (b) all other United States or foreign applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization or similar debtor relief laws from time to time in effect affecting the rights of creditors generally, in each case as amended from time to time.

 

Default means any event that, if it continues uncured, will, with the lapse of time or the giving of notice or both, constitute an Event of Default.

 

Default Rate means a rate per annum equal to the lesser of (i) three percent (3%) over the Contract Rate, or (ii) the maximum rate of interest permitted to be charged by applicable laws or regulation governing this Agreement until paid.

 

Deposit Account means, individually and collectively, any bank or other depository accounts of a Loan Party.

 

Disposition means, as to any asset or right of any Loan Party, (a) any sale, lease, assignment or other transfer (other than to any other Loan Party), but specifically excluding any license or sublicense,

(b) any loss, destruction or damage thereof or (c) any condemnation, expropriation, confiscation, requisition, seizure or taking thereof, in each case excluding (i) the sale of inventory or Product in the ordinary course of business, (ii) any sale or issuance of Equity Interests by Borrower or any Subsidiary and

(iii) sales or dispositions in reliance on Section 7.4(b)(ii), (iv), (vi), (xiii), (x) and/or (xv) and (iv) any other Disposition where the Net Cash Proceeds of any sale, lease, assignment, transfer, condemnation, expropriation, confiscation, requisition, seizure or taking do not in the aggregate exceed $500,000 in any Fiscal Year.

 

Division means, with respect to any Person which is an entity, the division of such Person into two

(2) or more separate such Persons, with the dividing Person either continuing or terminating its existence as part of such division, including as contemplated under Section 18-217 of the Delaware Limited Liability Act for limited liability companies formed under Delaware law, or any analogous action taken pursuant to any other applicable law with respect to any corporation, limited liability company, partnership or other entity. The word “Divide,” when capitalized, shall have a correlative meaning.

 

Dollar and $ mean lawful money of the United States of America.

 

Drug Application means a new drug application, an abbreviated drug application, or a product license application for any Product, as appropriate, as those terms are defined in the FDA Law and Regulation.

 

EBITDA means, for any Person and its Subsidiaries for any period, Consolidated Net Income for such period plus, to the extent deducted in determining such Consolidated Net Income for such period (and without duplication), (i) Interest Expense, (ii) tax expense (including tax accruals), (iii) depreciation and amortization, (iv) nonrecurring cash fees, costs and expenses incurred in connection with the Acquisitions of product licenses and product lines from a third party, and milestone and royalty payments to any third party, in relation to any Material Contract or any other Acquisition made prior to the date of this Agreement,

 

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(v) non-cash expenses relating to equity-based compensation or purchase accounting, (vi) non-cash charges reducing Consolidated Net Income, (vii) fees, premiums, expenses and other transaction costs incurred in connection with the negotiation and entry into this Agreement and the Approved AR Loan Facility and

(viii) other non-recurring and/or non-cash expenses or charges approved by the Agent.

 

Elapsed Period has the meaning set forth in Section 2.9.1(a).

 

Environmental Claims means all claims, however asserted, by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release or injury to the environment or any Person or property.

 

Environmental Laws means all present or future foreign, federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case relating to any matter arising out of or relating to the effect of the environment on health and safety, or pollution or protection of the environment or workplace, including any of the foregoing relating to the presence, use, production, generation, handling, transport, treatment, storage, disposal, distribution, discharge, release, control or cleanup of any Hazardous Substance.

 

Equity Interests means, with respect to any Person, its equity ownership interests, its common stock and any other capital stock or other equity ownership units of such Person authorized from time to time, and any other shares, options, interests, participations or other equivalents (however designated) of or in such Person, whether voting or nonvoting, including, without limitation, common stock, options, warrants, preferred stock, phantom stock, membership units (common or preferred), stock appreciation rights, membership unit appreciation rights, convertible notes or debentures, stock purchase rights, membership unit purchase rights and all securities convertible, exercisable or exchangeable, in whole or in part, into any one or more of the foregoing.

 

Event of Default means any of the events described in Section 8.1.

 

Excluded Taxes has the meaning set forth in Section 3.1(a).

 

Exempt Accounts means any Deposit Accounts, securities accounts or other similar accounts (i) into which there are deposited no funds other than those intended solely to cover compensation to employees of the Loan Parties (and related contributions to be made on behalf of such employees to health and benefit plans) plus balances for outstanding checks for compensation and such contributions from prior periods; (ii) constituting employee withholding accounts and contain only funds deducted from pay otherwise due to employees for services rendered to be applied toward the tax obligations of such Person or its employees; or (iii) that contain cash deposits, at any one time, in an aggregate amount less than

$1,000,000 in the aggregate.

 

Exit Fee shall have the meaning set forth in Section 2.7(b).

 

Fair Valuation shall mean the determination of the value of the consolidated assets of a Person by the Borrower in good faith on the basis of the amount which may be realized by a willing seller within a reasonable time through collection or sale of such assets at market value on a going concern basis to an interested buyer who is willing to purchase under ordinary selling conditions in an arm’s length transaction.

 

FATCA means Sections 1471 through 1474 of the IRC and any current or future regulations thereunder or official interpretations thereof.

 

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FD&C Act means the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §§ 301 et seq., as amended.

 

FDA means the Food and Drug Administration of the United States of America.

 

FDA Law and Regulation means the provisions of the FD&C Act and all applicable regulations promulgated by the FDA.

 

FDA Products means any finished products sold by Borrower or any of the other Loan Parties for itself or for a third party that are subject to applicable Health Care Laws.

 

Federal Funds Effective Rate means, for any day, the greater of (a) the rate calculated by the Federal Reserve Bank of New York based on such day’s Federal funds transactions by depositary institutions (as determined in such manner as the Federal Reserve Bank of New York shall set forth on its public website from time to time) and published on the next succeeding day on which commercial banks are open for commercial banking business in New York, New York, by the Federal Reserve Bank of New York as the Federal funds effective rate and (b) 0%.

 

Fiscal Quarter means a calendar quarter of a Fiscal Year.

 

Fiscal Year means the fiscal year of Borrower and its Subsidiaries, which period shall be the twelve

(12) month period ending on December 31 of each year.

 

Foreign Lender means any Lender that is not a “United States person” within the meaning of Section 7701(a)(30) of the IRC.

 

Foreign Subsidiary shall have the meaning set forth in Section 6.8(b).

 

FRB means the Board of Governors of the Federal Reserve System or any successor thereto.

 

GAAP means generally accepted accounting principles in effect in the United States of America set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination.

 

Governmental Authority means any nation or government, any state or other political subdivision thereof, and any agency, branch of government, department or Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any corporation or other Person owned or controlled (through stock or capital ownership or otherwise) by any of the foregoing, whether domestic or foreign. Governmental Authority shall include any agency, branch or other governmental body charged with the responsibility and/or vested with the authority to administer and/or enforce any Health Care Laws.

 

Guarantee and Collateral Agreement means the Guarantee and Collateral Agreement dated as of the Closing Date executed by each Loan Party signatory thereto in favor of Agent for the benefit of Agent and Lenders.

 

Hazardous Substances means hazardous waste, pollutant, contaminant, toxic substance, oil, hazardous material, chemical or other substance regulated by any Environmental Law.

 

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Health Care Laws mean all foreign, federal and state fraud and abuse laws relating to the regulation of healthcare products, pharmaceutical products, laboratory facilities and services, healthcare providers, healthcare professionals, healthcare facilities, clinical research facilities or healthcare payors, including but not limited to (i) the federal Anti-Kickback Statute (42 U.S.C. (§1320a-7b(b)), the Stark Law (42 U.S.C.

§1395nn and §1395(q)), the civil False Claims Act (31 U.S.C. §3729 et seq.), TRICARE (10 U.S.C. Section 1071 et seq.), Section 1320a-7 and 1320a-7a of Title 42 of the United States Code and the regulations promulgated pursuant to such statues; (ii) the Health Insurance Portability and Accountability Act of 1996 (Pub. L. No. 104-191), as amended by the Health Information, Technology for Economic and Clinical Health Act of 2009 (collectively, “HIPAA”), and the regulations promulgated thereunder, (iii) Medicare (Title XVIII of the Social Security Act) and the regulations promulgated thereunder; (iv) Medicaid (Title XIX of the Social Security Act) and the regulations promulgated thereunder; (v) the FD&C Act and all applicable requirements, regulations and guidances issued thereunder by the FDA (including FDA Law and Regulation); (vi) quality, safety and accreditation standards and requirements of all applicable foreign and domestic federal, provincial or state laws or regulatory bodies; (vii) all applicable licensure laws and regulations; (viii) all applicable professional standards regulating healthcare providers, healthcare professionals, healthcare facilities, clinical research facilities or healthcare payors; and (ix) any and all other applicable health care laws (whether foreign or domestic), regulations, manual provisions, policies and administrative guidance, including those related to the corporate practice of medicine, fee-splitting, state anti-kickback or self-referral prohibitions, each of clauses (i) through (ix) as may be amended from time to time.

 

Hedging Obligation means, with respect to any Person, any liability of such Person under any interest rate, currency or commodity swap agreement, cap agreement or collar agreement, and any other agreement or arrangement designed to protect a Person against fluctuations in interest rates, currency exchange rates or commodity prices. The amount of any Person’s obligation in respect of any Hedging Obligation shall be deemed to be the termination value that would be reflected in the financial statements of such Person in accordance with GAAP.

 

Indemnified Taxes has the meaning set forth in Section 3.1(a).

 

Intellectual Property shall mean all present and future: trade secrets, know-how and other proprietary information; Trademarks and Trademark Licenses (as defined in the Guarantee and Collateral Agreement), internet domain names, and all registrations or applications for registrations which have heretofore been or may hereafter be issued thereon throughout the world; Copyrights (including Copyrights for computer programs, but excluding commercially available off-the-shelf software and any Intellectual Property rights relating thereto) and Copyright Licenses (as defined in the Guarantee and Collateral Agreement) and all tangible and intangible property embodying the Copyrights, unpatented inventions (whether or not patentable); Patents and Patent Licenses (as defined in the Guarantee and Collateral Agreement); Mask Works (as defined in the Guarantee and Collateral Agreement); industrial design applications and registered industrial designs; license agreements related to any of the foregoing and income therefrom, books, records, writings, computer tapes or disks, flow diagrams, specification sheets, computer software, source codes, object codes, executable code, data, databases and other physical manifestations, embodiments or incorporations of any of the foregoing; customer lists and customer information, the right to sue for all past, present and future infringements of any of the foregoing; all other intellectual property; and all common law and other rights throughout the world in and to all of the foregoing.

 

Intercreditor Agreement means any intercreditor or similar agreement (in form and substance acceptable to Agent in its commercially reasonable (from the stand point of a secured lender) discretion) entered into between Agent and the lender(s) (or an agent on their behalf) under any Approved AR Loan Facility in accordance with Section 10.22 hereof, as each may be amended, restated, supplemented, or otherwise modified from time to time.

 

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Interest Expense means for any Person and its Subsidiaries for any period the consolidated interest expense of such Person and its Subsidiaries for such period (including all imputed interest on Capital Leases) determined in accordance with GAAP.

 

Interest Only Extension Conditions means the satisfaction, of each of the following: (a) the Aggregate Revenue as of December 31, 2019 for the twelve (12) consecutive months then ended is equal to or greater than $50,000,000, and (b) the EBITDA of Borrower and its Subsidiaries for the Fiscal Quarter ending December 31, 2019 is greater than $0.

 

Inventory has the meaning set forth in the Guarantee and Collateral Agreement as the context requires.

 

Investment means, with respect to any Person, (a) the purchase of any debt or equity security of any other Person, (b) the making of any loan or advance to any other Person, (c) becoming obligated with respect to a Contingent Obligation in respect of Debt of any other Person (other than travel and similar advances to employees in the ordinary course of business) or (d) the making of an Acquisition.

 

Investors means Larry Feinberg, Jack Schuler and their respective Affiliates.

 

IP Security Agreement means the Intellectual Property Security Agreement dated on or about the Closing Date by each Loan Party signatory thereto in favor of Agent for the benefit of Agent and Lenders.

 

IRC means the Internal Revenue Code of 1986, as amended.

 

IRS means the United States Internal Revenue Service.

 

Key Person means each of (a) Todd Norbe, (b) John Beaver and (c) Jonathan Lorde.

 

Key Person Event means, unless such actions are consented to in advance in writing by Agent, two or more out of the three Key Persons shall, at any one time, no longer serve in their respective, current capacities with Borrower, unless one of such departed Key Persons is replaced within one hundred fifty

(150) days (or such longer period as Agent may agree), and the other departed Key Persons(s) are replaced within two hundred ten (210) days (or such longer period of time as Agent may agree to), with individuals of appropriate qualification and experience to assume the respective responsibilities of such departed Key Persons, which individuals have been approved in writing by Agent (which shall not be unreasonably withheld or delayed) to assume the respective responsibilities and capacities of such departed Key Persons. Notwithstanding anything to the contrary contained in the definition of “Key Person” or the foregoing provisions of this definition of “Key Person Event,” if any Key Person is replaced within the time period specified in the preceding sentence with an individual of appropriate qualification and experience to assume the responsibilities of such Key Person and such individual has been approved in writing by Agent (which shall not be unreasonably withheld or delayed) to assume such responsibility and capacity of such departed Key Person, then following such replacement, such individual shall be deemed to be a Key Person for purposes of this definition of “Key Person Event.” .

 

Legal Costs means, with respect to any Person, all reasonable, duly documented, out-of-pocket fees and charges of any counsel, accountants, auditors, appraisers, consultants and other professionals to such Person, and all court costs and similar legal expenses.

 

Lenders has the meaning set forth in the Preamble.

 

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LIBOR Rate means a fluctuating rate per annum equal to the rate which appears on the Bloomberg Page BBAM1 (or on such other substitute Bloomberg page that displays rates at which U.S. Dollar deposits are offered by leading banks in the London interbank deposit market), as the offered rate for loans in Dollars for a three (3) month period, rounded upwards, if necessary, to the nearest 1/8 of 1%. The rate is set by the ICE Benchmark Administration as of 11:00 a.m. (London time) as determined two (2) Business Days prior to each Payment Date, and effective on the Payment Date immediately following such determination date and continuing to but not including the next succeeding Payment Date. If Bloomberg Professional Service (or another nationally-recognized rate reporting source acceptable to Agent) no longer reports the LIBOR Rate or Agent determines in good faith that the rate so reported no longer accurately reflects the rate available to Agent in the London Interbank Market or if such index no longer exists or if page USD-LIBOR- BBA (ICE) no longer exists or accurately reflects the rate available to Agent in the London Interbank Market, Agent may select a replacement index that approximates as near as possible such prior index. Notwithstanding the foregoing, (i) if at any time Agent determines (which determination shall be conclusive absent manifest error) that the LIBOR Rate is no longer available for determining interest rates for loans or notes similar to the Loans, then Agent shall, in consultation with Borrower, endeavor to establish an alternate rate of interest to the LIBOR Rate that gives due consideration to the then prevailing market convention for determining a rate of interest for loans or notes similar to the Loans in the United States at such time, and, if requested by Agent, Agent and Lenders at such time party hereto and the Borrower shall enter into an amendment to this Agreement to reflect such alternate rate of interest and such other related changes to this Agreement as may be applicable, and (ii) in no event shall the “LIBOR Rate” or any such alternate rate of interest to the LIBOR Rate ever be less than two and one-quarter of one percent (2.25%) per annum at any time.

 

Lien means, with respect to any Person, any interest granted by such Person in any real or personal property, asset or other right owned or being purchased or acquired by such Person which secures payment or performance of any obligation and shall include any mortgage, lien, encumbrance, charge or other security interest of any kind, whether arising by contract, as a matter of law, by judicial process or otherwise.

 

Loan or Loans means, individually and collectively the Term Loan and any other advances made by Agent and Lenders in accordance with the Loan Documents.

 

Loan Documents means this Agreement, any Notes, the Collateral Documents and all documents, instruments and agreements delivered in connection with the foregoing.

 

Loan Party means Borrower and each of its Subsidiaries; provided, however, notwithstanding anything to the contrary herein, neither Biolase Australia Pty. Ltd., an entity organized under the laws of Australia and Biolase (NZ) Limited, an entity organized under the laws of New Zealand shall be considered a Loan Party of the Borrower for purposes of this Agreement or any other Loan Document.

 

Margin Stock means any “margin stock” as defined in Regulation T, U or X of the FRB.

 

Material Adverse Effect means (a) a material adverse change in, or a material and adverse effect upon, the condition (financial or otherwise), operations, assets, business or properties of the Loan Parties taken as a whole, (b) a material impairment of the ability of the Loan Parties, taken as a whole, to perform any of their payment Obligations under any Loan Document or (c) a material and adverse effect upon any material portion of the Collateral under the Collateral Documents or upon the legality, validity, binding effect or enforceability against any Loan Party of any material Loan Document.

 

Material Contract has the meaning assigned in Section 5.21 hereof.

 

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Multiemployer Pension Plan means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which Borrower or any member of the Controlled Group may have any liability.

 

Net Cash Proceeds means, with respect to any Disposition, the aggregate cash proceeds (including cash proceeds received pursuant to policies of insurance and by way of deferred payment of principal pursuant to a note, installment receivable or otherwise, but only as and when received) received by any Loan Party pursuant to such Disposition net of (i) the reasonable direct costs relating to such Disposition (including sales commissions and legal, accounting and investment banking fees, commissions and expenses), (ii) any portion of such proceeds deposited in an escrow account pursuant to the documentation relating to such Disposition (provided that such amounts shall be treated as Net Cash Proceeds upon their release from such escrow account to and receipt by the applicable Loan Party), (iii) taxes and other governmental costs and expenses paid or reasonably estimated by a Loan Party to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements),

(iv)amounts required to be applied to the repayment of any Debt (together with any interest thereon, premium or penalty and any other amount payable with respect thereto) secured by a Lien that has priority over the Lien, if any, of Agent on the asset subject to such Disposition, (v) reserves for purchase price adjustments and retained liabilities reasonably expected to be payable by the Loan Parties in connection therewith established in accordance with GAAP (provided that upon the final determination of the amount paid in respect of such purchase price adjustments and retained liabilities, the actual amount of purchase price adjustments and retained liabilities paid is less than such reserves, the difference shall, at such time, constitute Net Cash Proceeds) and (vi) with respect to any Disposition described in clauses (a), (b) or (c) of the definition thereof, all cash actually applied within one-hundred eighty (180) days to reinvest in assets to be used in the business of Borrower and the Subsidiaries.

 

Net Sales means the gross amount billed or invoiced by Borrower and its Subsidiaries for Services and for the sale of Products and (including products and services ancillary thereto) to independent customers, less deductions for (a) quantity, trade, cash or other discounts, allowances, credits or rebates (including customer rebates) actually allowed or taken, (b) amounts deducted, repaid or credited by reason of rejections or returns of goods and government mandated rebates, or because of chargebacks or retroactive price reductions, and (c) taxes, tariffs, duties or other governmental charges or assessments (including any sales, value added or similar taxes other than an income tax) levied, absorbed or otherwise imposed on or with respect to the production, sale, transportation, delivery or use of pharmaceutical products. A Product or Service shall be considered sold and/or provided when billed out or invoiced. To the extent applicable, components of Net Sales shall be determined in the ordinary course of business in accordance with historical practice and using the accrual method of accounting in accordance with GAAP. For the purposes of calculating Net Sales, Lenders and Agent understand and agree that (i) Affiliates of a Borrower shall not be regarded as independent customers and (ii) Net Sales shall not include Products distributed for product development purposes, including for use in pre-clinical trials.

 

Note means a promissory note substantially in the form of Exhibit C.

 

Obligations means all liabilities, indebtedness and obligations (monetary (including post-petition interest, allowed or not) or otherwise) of any Loan Party under this Agreement, any other Loan Document or any other document or instrument executed in connection herewith or therewith which are owed to any Lender or Affiliate of a Lender, in each case howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due. For the avoidance of doubt, “Obligations” shall include Borrower’s obligation to pay any amounts due under Section 2.8.2 or COC Prepayment Fee otherwise due and payable on such date of determination.

 

OFAC shall mean the U.S. Department of Treasury’s Office of Foreign Asset Control.

 

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Operating Burn shall mean, for any period being measured the (i) aggregate cash flow from operations of Borrower and its Subsidiaries less (ii) capital expenditures (in the case of clauses (i) and (ii), for the period being measured and as determined in accordance with GAAP).

 

Origination Fee shall have the meaning set forth in Section 2.7(a).

 

Paid in Full, Pay in Full or Payment in Full means, with respect to any Obligations, the payment in full in cash of all such Obligations (other than contingent indemnification obligations, yield protection and expense reimbursement to the extent no claim giving rise thereto has been asserted in respect of contingent indemnification obligations, and to the extent no amounts therefor have been asserted, in the case of yield protection and expense reimbursement obligations).

 

Patents shall mean all of each Loan Party’s (or if referring to another Person, such other Person’s) now existing or hereafter acquired right, title and interest in and to: (i) all patents, patent applications, inventions, invention disclosures and improvements, and all applications, registrations and recordings relating to the foregoing as may at any time be filed in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state thereof or any political subdivision thereof, or in any other country, and all research and development relating to the foregoing; and (ii) the reissues, divisions, continuations, renewals, re-examinations, extensions and continuations-in-part of any of the foregoing.

 

Payment Date means the fifteenth (15th) day of each of February, May, August and November (or the next succeeding Business Day to the extent such 15th day is not a Business Day), commencing with February 15, 2019.

 

Permitted Holders means (a) the Investors and (b) any Person with which one or more Investors form a “group” (within the meaning of Section 14(d) of the Exchange Act) so long as, in the case of this clause (b), the Investors beneficially own more than 50% of the relevant voting Equity Interests beneficially owned by the group.

 

PBGC means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its material functions under ERISA.

 

Pension Plan means a “pension plan”, as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a Multiemployer Pension Plan), and to which Borrower or any member of the Controlled Group may have any liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.

 

Permit means, with respect to any Person any permit, approval, clearance, authorization, license, registration, certificate, concession, grant, franchise, variance or permission from, and any other contractual obligations with, any Governmental Authority, in each case whether or not having the force of law and applicable to or binding upon such Person or any of its property or Products or to which such Person or any of its property or Products is subject, including without limitation all registrations with Governmental Authorities.

 

Permitted Liens means Liens permitted by Section 7.2.

 

Person means any natural person, corporation, partnership, trust, limited liability company, association, Governmental Authority or unit, or any other entity, whether acting in an individual, fiduciary or other capacity.

 

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Prior Debt means the Debt listed on Schedule 4.1.

 

Pro Rata Term Loan Share means, with respect to any Lender, the applicable percentage (as adjusted from time to time in accordance with the terms hereof) specified opposite such Lender’s name on Annex I which percentage represents the aggregate percentage of the Term Loan Commitment held by such Lender, which percentage shall be with respect to the outstanding balance of the Term Loan as of any date of determination after the Term Loan Commitment has terminated.

 

Product means any products manufactured, sold, developed, tested or marketed by Borrower or any of its Subsidiaries from time to time, including, without limitation, those products set forth on Schedule 5.18(b) (as updated from time to time in accordance with Section 6.1.2).

 

Registered Intellectual Property means all applications, registrations and recordings for or of Patents, Trademarks or Copyrights filed by a Loan Party with any Governmental Authority, all internet domain name registrations owned by a Loan Party, and all proprietary software owned by a Loan Party.

 

Required Lenders means Lenders having an aggregate Pro Rata Term Loan Share in excess of fifty percent (50%), collectively.

 

Required Permit means a Permit (a) required under applicable law to the business of Borrower or any of its Subsidiaries or necessary in the manufacturing, importing, exporting, possession, ownership, warehousing, marketing, promoting, sale, labeling, furnishing, distribution or delivery of goods or services under any laws applicable to the business of Borrower or any of its Subsidiaries (including, without limitation, any Health Care Laws) or any Drug Application (including without limitation, at any point in time, all licenses, approvals and permits issued by the FDA, CMS, or any other applicable Governmental Authority necessary for the testing, manufacture, marketing or sale of any Product by Borrower or any of its Subsidiary as such activities are being conducted by Borrower or its Subsidiary with respect to such Product at such time), and (b) required by any Person from which Borrower or any of its Subsidiaries have received an accreditation.

 

Responsible Officer shall mean the president, vice president or secretary of a Person, or any other officer having substantially the same authority and responsibility; or, with respect to compliance with financial covenants or delivery of financial information, the chief financial officer, the treasurer or the controller of a Person, or any other officer having substantially the same authority and responsibility, and in all cases such person shall be listed on an incumbency certificate delivered to Agent in form and substance reasonably acceptable to Agent.

 

Revenue-Based Payment has the meaning set forth in Section 2.9.1(a).

 

Royalties means the amount of any and all royalties, license fees and any other payments or income of any type recognized as revenue in accordance with GAAP by Borrower and its Subsidiaries with respect to the sale of Products or the provision of services by independent licensees of Borrower and/or its Subsidiaries, including any such payments characterized as a share of net profits, any up-front or lump sum payments, any milestone payments, commissions, fees or any other similar amounts, less deductions for amounts deducted, repaid or credited by reason of adjustments to the sales upon which royalty amounts are based, regardless of the reason for such adjustment to such sales. For the purposes of calculating Royalties, Lenders and Agent understand and agree that Affiliates of Borrower shall not be regarded as independent licensees.

 

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Services means services provided by Borrower or any Affiliate of Borrower to un-Affiliated Persons, including without limitation any sales, laboratory analysis, testing, consulting, marketing, commercialization and any other healthcare-related services.

 

Subordinated Debt means any Debt incurred by Borrower and/or any other Loan Party that is subordinated to the Obligations pursuant to a subordination agreement entered into between Agent, any applicable Loan Party and the subordinated creditor(s) upon terms acceptable to Agent in its commercially reasonable discretion; provided, however, that the Approved AR Loan Facility shall not be considered Subordinated Debt.

 

Solvent means, as to any Person at any time, that (a) the fair value of the property of such Person is greater than the amount of such Person’s liabilities (including disputed, contingent, unmatured and unliquidated liabilities); (b) the present fair saleable value of the property (on a going concern basis) of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person is able to realize upon its assets and pay its debts and other liabilities (including subordinated, disputed, contingent, unmatured and unliquidated liabilities) as they mature in the normal course of business; (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature; and (e) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute unreasonably small capital.

 

Subsidiary means, with respect to any Person, a corporation, partnership, limited liability company or other entity of which such Person owns, directly or indirectly, such number of outstanding shares or other equity interests as to have more than fifty percent (50%) of the ordinary voting power for the election of directors or other managers of such corporation, partnership, limited liability company or other entity. Unless the context otherwise requires, each reference to Subsidiaries herein shall be a reference to direct and indirect Subsidiaries of Borrower. Notwithstanding anything to the contrary herein, neither Biolase Australia Pty. Ltd., an entity organized under the laws of Australia and Biolase (NZ) Limited, an entity organized under the laws of New Zealand shall be considered Subsidiaries of the Borrower for purposes of Section 6.8(a) of this Agreement.

 

SWK has the meaning set forth in the Preamble.

 

Taxes has the meaning set forth in Section 3.1(a).

 

Term Loan has the meaning set forth in Section 2.1.

 

Term Loan Commitment means $12,500,000.

 

Term Loan Maturity Date means November 9, 2023.

 

Termination Date means the earlier to occur of (a) the Term Loan Maturity Date, or (b) the date upon which the Loan and all other Obligations are Paid in Full, whether as a result of (i) the prepayment of the Term Loan and all Obligations through (x) the application of Net Cash Proceeds from any Disposition, or (y) any other mandatory or voluntary prepayment of the Term Loan in full, (ii) the contractual acceleration of the Loan hereunder, (iii) the acceleration of the Loan by Agent in accordance with this Agreement, or (iv) otherwise.

 

Trademarks shall mean all of each Loan Party’s (or if referring to another Person, such other Person’s) now existing or hereafter acquired right, title, and interest in and to: (i) all of such Loan Party’s (or if referring to another Person, such other Person’s) trademarks, trade dress, trade names, designs,

 

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corporate names, company names, business names, fictitious business names, trade styles, service marks, logos, slogans (and all translations, adaptions, derivations and combinations of the foregoing), other business identifiers, all applications, registrations and recordings relating to the foregoing as may at any time be filed in the United States Patent and Trademark Office or in any similar office or agency of the United States, or in any other country, and the goodwill of the business relating to the foregoing; (ii) all renewals thereof; and (iii) all designs and general intangibles of a like nature.

 

Uniform Commercial Code means the Uniform Commercial Code as in effect in the State of New York; provided that if perfection or the effect of perfection or non-perfection or the priority of any security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, “Uniform Commercial Code” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority.

 

U.S. or United States means the United States of America.

 

U.S. Lender means any Lender that is a “United States person” within the meaning of Section 7701(a)(30) of the IRC.

 

Wholly-Owned Subsidiary means, as to any Person, another Person all of the Equity Interests of which (except directors’ qualifying shares) are at the time directly or indirectly owned by such Person and/or another Wholly-Owned Subsidiary of such Person.

 

 

1.2

Interpretation.

 

(a)In the case of this Agreement and each other Loan Document, (i) the meanings of defined terms are equally applicable to the singular and plural forms of the defined terms; (ii) Annex, Exhibit, Schedule and Section references are to such Loan Document unless otherwise specified; (iii) the term “including” is not limiting and means “including but not limited to”; (iv) in the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including”; the words “to” and “until” each mean “to but excluding”, and the word “through” means “to and including”;

(v)unless otherwise expressly provided in such Loan Document, (A) references to agreements and other contractual instruments shall be deemed to include all subsequent amendments, restatements and other modifications thereto, but only to the extent such amendments, restatements and other modifications are not prohibited by the terms of any Loan Document, and (B) references to any statute or regulation shall be construed as including all statutory and regulatory provisions amending, replacing, supplementing or interpreting such statute or regulation; (vi) this Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters, all of which are cumulative and each shall be performed in accordance with its terms and (vii) this Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to Agent, Borrower, Lenders and the other parties hereto and thereto and are the products of all parties; accordingly, they shall not be construed against Borrower, Agent or Lenders merely because of Borrower’s, Agent’s or Lenders’ involvement in their preparation. Except where otherwise expressly provided in the Loan Documents, in any instance where the approval, consent or the exercise of Agent’s judgment is required, the granting or denial of such approval or consent and the exercise of such judgment shall be (x) within the sole and absolute discretion of Agent and/or Lenders; and (y) deemed to have been given only by a specific writing intended for such purpose executed by Agent.

 

(b)For purposes of converting any amount reported or otherwise denominated in any currency other than Dollars to Dollars under or in connection with the Loan Documents, Agent shall calculate such currency conversion via the applicable exchange rate identified and normally published by

 

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Bloomberg Professional Service as the applicable exchange rate as of the close of currency trading on each trading date during the applicable period of measurement, or, if such currency conversion deals exclusively with a particular date of determination, as of the close of currency trading on such date of determination (or the following trading date to the extent no currency trading took place on such date of determination). If Bloomberg Professional Service no longer reports such currency exchange rate, Agent shall select another nationally-recognized currency exchange rate reporting service selected by Agent in good faith.

 

(c)If any payment hereunder is to be made on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. In the case of any extension of any payment of principal pursuant to the preceding sentence, interest thereon shall be payable at the then applicable rate during such extension. When the performance of any covenant, duty or obligation (other than payment of an obligation as described in the immediately preceding sentence) is required on a day which is not a Business Day, the date on which such performance is required shall be extended to the immediately succeeding Business Day.

 

(d)Any and all notices, reports, financial statements or other documents or instruments that are required to be delivered pursuant this Agreement (including, without limitation and for the avoidance of doubt, pursuant to Section 6.1.1, Section 6.1.2, Section 6.1.5, Section 6.1.6, Section 6.1.7, Section 6.1.10 and Section 6.9) shall be deemed to have been delivered on the date on which such documents are posted on the SEC’s website at www.sec.gov.

 

(e)In the case of this Agreement and each other Loan Document, to the extent that any representation and warranty applies (i) to any Foreign Subsidiary or (ii) any asset, Product, Service or property of any Foreign Subsidiary, such representation and warranty shall be subject to the actual knowledge of the Loan Parties as context requires.

 

(f)In the case of this Agreement and each other Loan Document, and notwithstanding anything to the contrary in any Loan Document, it is understood and agreed that (i) the Agent shall not require the perfection of a security interest granted in Collateral (under and as defined in the Guarantee and Collateral Agreement) as to which (A) the cost, burden, difficulty or consequence (including any effect on the ability of the relevant Loan Party to conduct its operations and business in the ordinary course of business) of perfecting a security interest therein outweighs the benefit of a security interest to the relevant Secured Parties (under and as defined in the Guarantee and Collateral Agreement) afforded thereby, as determined by Agent in its reasonable (from standpoint of a secured lender) discretion and (B) solely as it relates to any Collateral that does not constitute US Collateral (under and as defined in the Guarantee and Collateral Agreement) or that is owned or held by a Loan Party that is organized under the law of any jurisdiction other than the United States or Canada, the granting of a security interest in, or the perfection of a security interest granted in, in either case, would result in material and adverse tax consequences to any Loan Party (as determined by Agent in its reasonable (from standpoint of a secured lender) discretion) and (ii) to the extent any Foreign Subsidiary is prohibited by applicable law from being a Guarantor (under and as defined in the Guarantee and Collateral Agreement), such Foreign Subsidiary’s status as a Guarantor and/or its Guarantor Obligations, as applicable, under and as defined in the Guarantee and Collateral Agreement, shall be limited to the maximum amount of liability which could be asserted against such Guarantor without causing such Foreign Subsidiary (or its directors and officers) to be in violation with applicable law.

 

Section 2Credit Facility.

 

2.1Term Loan Commitments. On and subject to the terms and conditions of this Agreement, each Lender, severally and for itself alone, agrees to make a term loan to Borrower (each such loan, individually and collectively, a Term Loan”) in an amount equal to such Lender’s applicable Pro Rata

 

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Term Loan Share of the Term Loan Commitment. The Commitments of Lenders to make the Term Loan shall terminate concurrently with the making the Term Loan on the Closing Date. The Loan is not a revolving credit facility, and therefore any amount thereof that is repaid or prepaid by Borrower, in whole or in part, may not be re-borrowed.

 

 

2.2

Loan Procedures.

 

On the Closing Date, each Lender shall advance to Borrower an amount equal to its Pro Rata Share of the Term Loan, upon Borrower’s satisfaction of the conditions to closing described in Section 4 of this Agreement.

 

 

2.3

Commitments Several.

 

The failure of any Lender to make the Term Loan on the Closing Date shall not relieve any other Lender of its obligation (if any) to make its Loan on the applicable date, but no Lender shall be responsible for the failure of any other Lender to make the Term Loan to be made by such other Lender.

 

 

2.4

Indebtedness Absolute; No Offset; Waiver.

 

The payment obligations of Borrower hereunder are absolute and unconditional, without any right of rescission, set-off, counterclaim or defense for any reason against Agent and Lenders. As of the Closing Date, the Loan has not been compromised, adjusted, extended, satisfied, rescinded, set-off or modified, and the Loan Documents are not subject to any litigation, dispute, refund, claims of rescission, set-off, netting, counterclaim or defense whatsoever, including but not limited to, claims by or against any Loan Party or any other Person. Payment of the Obligations by Borrower, shall be made only by wire transfer, in Dollars, and in immediately available funds when due and payable pursuant to the terms of this Agreement and the other Loan Documents, is not subject to compromise, adjustment, extension, satisfaction, rescission, set- off, counterclaim, defense, abatement, suspension, deferment, deductible, reduction, termination or modification, whether arising out of transactions concerning the Loan, or otherwise. Without limitation to the foregoing, to the fullest extent permitted under applicable law and notwithstanding any other term or provision contained in this Agreement or any other Loan Document, Borrower hereby waives (and shall cause each Loan Party to waive) (a) presentment, protest and demand, notice of default (except as expressly required in the Loan Documents), notice of intent to accelerate, notice of acceleration, notice of protest, notice of demand and of dishonor and non-payment of the Obligations, (b) any requirement of diligence or promptness on Agent’s part in the enforcement of its rights under the provisions of this Agreement and any other Loan Document, (c) any rights, legal or equitable, to require any marshalling of assets or to require foreclosure sales in a particular order, (d) all notices of every kind and description which may be required to be given by any statute or rule of law except as specifically required hereunder, (e) the benefit of all laws now existing or that may hereafter be enacted providing for any appraisement before sale or any portion of the Collateral, (f) all rights of homestead, exemption, redemption, valuation, appraisement, stay of execution, notice of election to mature or declare due the whole of the Obligations in the event of foreclosure of the Liens created by the Loan Documents, (g) the pleading of any statute of limitations as a defense to any demand under any Loan Document and (h) any defense to the obligation to make any payments required under the Loan Documents, including the obligation to pay taxes based on any damage to, defects in or destruction of the Collateral or any other event, including obsolescence of any of the Collateral, it being agreed and acknowledged that such payment obligations are unconditional and irrevocable. Borrower further acknowledges and agrees (i) to any substitution, subordination, exchange or release of any security or the release of any party primarily or secondarily liable for the payment of the Loan; (ii) that Agent shall not be required to first institute suit or exhaust its remedies hereon against others liable for repayment of all or any part of the Loan, whether primarily or secondarily (collectively, the “Obligors”), or to perfect or enforce its rights against any Obligor or any security for the Loan; and (iii) that

 

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its liability for payment of the Loan shall not be affected or impaired by any determination that any security interest or lien taken by Agent for the benefit of Agent and Lenders to secure the Loan is invalid or unperfected. Borrower acknowledges, warrants and represents in connection with each waiver of any right or remedy of Borrower contained in any Loan Document, that it has been fully informed with respect to, and represented by counsel of its choice in connection with, such rights and remedies, and all such waivers, and after such advice and consultation, has presently and actually intended, with full knowledge of its rights and remedies otherwise available at law or in equity, to waive or relinquish such rights and remedies to the full extent specified in each such waiver.

 

 

2.5

Loan Accounting.

 

 

2.5.1

Recordkeeping.

 

Agent, on behalf of each Lender, shall record in its records the date and amount of the Loan made by each Lender, each prepayment and repayment thereof. The aggregate unpaid principal amount so recorded shall be final, binding and conclusive absent manifest error. The failure to so record any such amount or any error in so recording any such amount shall not, however, limit or otherwise affect the Obligations of Borrower hereunder or under any Note to repay the principal amount of the Loans hereunder, together with all interest accruing thereon.

 

 

2.5.2

Notes.

 

At the request of any Lender, the Loan of such Lender shall be evidenced by a Note, with appropriate insertions, payable to the order of such Lender in a face principal amount equal to such Lender’s Pro Rata Term Loan Share and payable in such amounts and on such dates as are set forth herein.

 

 

2.6

Payment of Interest.

 

 

2.6.1

Interest Rates.

 

(a)The outstanding principal balance under the Loan shall bear interest at a per annum rate of interest equal to the Contract Rate (as may be adjusted from time to time in accordance with this Section 2.6.1). Whenever, subsequent to the date hereof, the LIBOR Rate is increased or decreased (as determined on the date that is two (2) Business Days prior to each Payment Date), the Contract Rate, as set forth herein, shall be similarly changed effective as of such subsequent Payment Date, without notice or demand of any kind by an amount equal to the amount of such change in the LIBOR Rate on the date that is two (2) Business Days prior to each such Payment Date. The interest due on the principal balance of the Loan outstanding as of any Payment Date shall be computed for the actual number of days elapsed during the period in question on the basis of a year consisting of three hundred sixty (360) days and shall be calculated by determining the average daily principal balance outstanding for each day of such period in question. The daily rate shall be equal to 1/360th times the Contract Rate. If any statement furnished by Agent for the amount of a payment due exceeded the actual amount that should have been paid because the LIBOR Rate decreased and such decrease was not reflected in such statement, Borrower shall make the payment specified in such statement from Agent and Borrower shall receive a credit for the overpayment, which credit shall be applied towards the next subsequent payment due hereunder. If any statement furnished by Agent for the amount of a payment due was less than the actual amount that should have been paid because the LIBOR Rate increased and such increase was not reflected in such statement, Borrower shall make the payment specified in such statement from Agent and Borrower shall be required to pay any resulting underpayment with the next subsequent payment due hereunder; for the avoidance of doubt, any payment that is made that is in an amount less than the actual amount that should have been paid because a

 

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LIBOR Rate increase was not reflected in a statement furnished by the Agent shall not be considered a Default or Event of Default hereunder.

 

(b)Borrower recognizes and acknowledges that any default on any payment, or portion thereof, due hereunder or to be made under any of the other Loan Documents, will result in losses and additional expenses to Agent in servicing the Loan, and in losses due to Lenders’ loss of the use of funds not timely received. Borrower further acknowledges and agrees that in the event of any such Default, Lenders would be entitled to damages for the detriment proximately caused thereby, but that it would be extremely difficult and impracticable to ascertain the extent of or compute such damages. Therefore, upon the Term Loan Maturity Date and/or upon the occurrence and during the existence of an Event of Default (or upon any acceleration), interest shall automatically accrue hereunder, without notice to Borrower, at the Default Rate. The Default Rate shall be calculated and due from the date that the Event of Default occurred and shall be payable upon demand.

 

(c)Notwithstanding anything herein to the contrary, if at any time the interest rate for any Loan (if applicable), together with all fees, charges and other amounts that are treated as interest on such Loan under applicable law (collectively, “charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) that may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder (if applicable), together with all charges payable in respect of the Loan, shall be limited to the Maximum Rate. To the extent lawful, the interest and charges that would have been paid in respect of such Loan but were not paid as a result of the operation of this Section shall be cumulated and the interest (if any) and charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the amount collectible at the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate for each day to the date of repayment, shall have been received by such Lender. Any amount collected by such Lender that exceeds the maximum amount collectible at the Maximum Rate shall be applied to the reduction of the principal balance of such Loan or refunded to the Borrower so that at no time shall the interest (if any) and charges paid or payable in respect of such Loan exceed the maximum amount collectible at the Maximum Rate.

 

 

2.6.2

Payments of Interest and Principal.

 

Borrower shall pay to Lenders all accrued interest on the Loan in arrears on each Payment Date, upon a prepayment of such Loan in accordance with Section 2.8 and at maturity in cash. Any partial prepayment of the Loan shall be applied in inverse order of maturity and so shall not reduce the amount of any quarterly principal amortization payment required pursuant to Section 2.9.1 (but this shall not be construed as permitting any partial prepayment other than as may be expressly permitted elsewhere in this Agreement).

 

 

2.7

Fees.

 

(a)Origination Fee. Borrower shall pay to SWK, for its own account, a fee (the “Origination Fee”) in the amount of $187,500, which Origination Fee shall be deemed fully earned and non-refundable on the Closing Date and which, at the option of the Borrower, may be net-funded on the Closing Date.

 

(b)Exit Fee. Subject to Section 2.8.3, upon the Termination Date, Borrower shall pay an exit fee (the “Exit Fee”) to Agent, for the benefit of Lenders, in an amount equal to (x) eight percent (8.0%) multiplied by (y) the aggregate principal amount of the Term Loan advanced hereunder, which Exit Fee shall be deemed fully earned and non-refundable on the Termination Date.

 

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2.8

Prepayment.

 

2.8.1Mandatory Prepayment. Borrower shall prepay all or part of, as applicable, the Obligations (which shall include (a) as it relates to any such prepayment made pursuant to this Section 2.8.1, on or after the Closing Date and prior to the first anniversary of the Closing Date, the amount of interest theretofore accrued but unpaid in respect of the principal amount so prepaid, plus the amount of interest that would have accrued on the principal amount so prepaid had it remained outstanding through the first anniversary of the Closing Date assuming the Contract Rate remained constant from the date of such prepayment through the first anniversary of the Closing Date, (b) as it relates to any such prepayment made on or after the first anniversary of the Closing Date, any amounts that would otherwise be due and payable on such date had Borrower voluntarily prepaid the Obligations pursuant to Section 2.8.2), or (c) as it relates to any such prepayment made on or before the first anniversary of the Closing Date, any COC Prepayment Fee that would otherwise be due and payable on such date had Borrower voluntarily prepaid the Obligations pursuant to Section 2.8.3) until paid in full within two (2) Business Days after the receipt by a Loan Party of any Net Cash Proceeds from any Disposition, in an amount equal to such Net Cash Proceeds.

 

 

2.8.2

Voluntary Prepayment.

 

(a)Subject to clause (b) below and Section 2.8.3 hereof, Borrower may, on at least five (5) Business Days’ (or such shorter period as Agent may agree in its sole discretion) written notice or telephonic notice (provided that such notice may be conditioned on receiving the proceeds of any transaction) (followed on the same Business Day by written confirmation thereof) to Agent (which shall promptly advise each Lender thereof) not later than 2:00 p.m. Dallas time on such day, prepay the Term Loan and all related Obligations in whole but not in part at any time on or after the first anniversary of the Closing Date. Such notice to Agent shall specify the amount and proposed date of such prepayment, and the application of such amounts to be prepaid shall be applied in accordance with Section 2.9.1(b) or 2.10.2 (as applicable).

 

(b)If Borrower makes a prepayment of the Term Loan under Section 2.8.2(a), it shall pay to Agent, for the benefit of Lenders, the following amounts (in addition to any such prepayment of the Term Loan and related Obligations) on the date of such prepayment: (i) if such prepayment is made on or after the first anniversary of the Closing Date but prior to the second anniversary of the Closing Date, six percent (6%) of the aggregate amount of the Term Loan so prepaid; (ii) if such prepayment is made on or after the second anniversary of the Closing Date but prior to the third anniversary of the Closing Date, one percent (1%) of the aggregate amount of the Term Loan so prepaid; and (iii) if such prepayment is made on or after the third anniversary of the Closing Date, zero percent (0%) of the aggregate amount of the Term Loan so prepaid.

 

(c)For the avoidance of doubt, a permitted payment under this Section 2.8.2 is independent of and in addition to Revenue-Based Payments that are credited toward the principal of the Loans under Section 2.9.1(b). Notwithstanding anything set forth herein or in any other Loan Documents to the contrary, any prepayment of the Loans shall be limited and governed by this Section 2.8.2 other than prepayments or repayments (i) via the application of Revenue-Based Payments made pursuant to Section

2.9.1 or Section 2.10.2, as applicable or (ii) prepayments in accordance with Section 2.8.1 or Section 2.8.3.

 

2.8.3Change of Control. Upon a Change of Control on or before the first anniversary of the Closing Date, Borrower shall immediately prepay all outstanding Obligations. Such prepayment shall

 

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equal the sum of the outstanding principal balance of the Term Loan and all other outstanding Obligations (subject to the limitations set forth in this Section 2.8.3), plus

 

(a) a prepayment fee (the COC Prepayment Fee”) calculated as the additional amount that would be needed to be paid such that the sum of (1) such COC Prepayment Fee, plus (2) the aggregate payments actually made in cash to all Lenders on or prior to such date in respect of the principal amount of the Term Loan, including without limitation the Origination Fee, plus (3) without duplication, all Revenue-Based Payments actually made in cash to all Lenders on or prior to such date (excluding, for the avoidance of doubt, any amounts paid in respect of any costs, expenses, indemnifications or reimbursements or any amounts paid in connection with the Closing Date Warrant, but including, for the avoidance of doubt, any amounts paid or payable in respect of the Origination Fee, the COC Prepayment Fee and Exit Fee) results in an amount equal to one and twenty-three hundredth (1.23) times the aggregate amount advanced by Lenders pursuant to Section

2.2 hereof on or prior to such date; or

 

(b) if such prepayment occurs on or after the first anniversary of the Closing Date, the amounts that would otherwise be due and payable upon a prepayment made pursuant to Section 2.8.2(b) on such date of determination, if any.

 

Any prepayment made under this Section 2.8.3 shall be applied in the order set forth in Section 2.9.1(b). For the avoidance of doubt, (i) no amounts paid or otherwise earned in connection with the Closing Date Warrant shall be included in the calculation of the Prepayment Fee, and (ii) no Exit Fee shall be due and payable upon a prepayment of the loan prior to the first anniversary of the Closing Date pursuant to this Section 2.8.3.

 

 

2.9

Repayment of Term Loan.

 

 

2.9.1

Revenue-Based Payment.

 

(a)During the period commencing on the date hereof until the Obligations are Paid in Full, Borrower promises to pay to Agent, for the account of each Lender according to its Pro Rata Term Loan Share, an amount based on a percentage of the aggregate of the Net Sales, Royalties and other revenue realized by Borrower and/or its Subsidiaries, on a consolidated basis, in accordance with GAAP (collectively, the “Aggregate Revenue”) in each Fiscal Quarter (the “Revenue-Based Payment”), which will be applied to the Obligations as provided in clause (b) below. The Revenue-Based Payment with respect to each Fiscal Quarter shall be payable on the Payment Date next following the end of such Fiscal Quarter. Commencing with the Fiscal Quarter beginning January 1, 2018, the Revenue-Based Payment with respect to each Fiscal Quarter shall be equal to:

 

(i)the aggregate Revenue-Based Payments payable during the period commencing as of January 1 of the Fiscal Year of which such Fiscal Quarter is part, through the end of such Fiscal Quarter (such elapsed portion of the Fiscal Year, the “Elapsed Period”), calculated as the sum of:

 

(A)Fifty percent (50.00%) of Aggregate Revenue during the Elapsed Period up to and including $7,500,000; plus

 

(B)Twenty-five percent (25.00%) of Aggregate Revenue during the Elapsed Period greater than $7,500,000; minus

 

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(ii)the aggregate amount of Revenue-Based Payments, if any, made with respect to prior Fiscal Quarters in such Fiscal Year; provided that the Revenue-Based Payment is payable solely upon Aggregate Revenue in a given Fiscal Year, and will not be calculated on a cumulative, year-over-year basis.

 

(b)So long as no Event of Default has occurred and is continuing and until the Obligations have been Paid in Full, each Revenue-Based Payment on each Payment Date will be applied in the following priority:

 

(i)FIRST, to the payment of all fees, costs, expenses and indemnities due and owing to Agent pursuant to Sections 2.7, 3.1, 3.2, 6.3(d), 10.4 and/or 10.5 under this Agreement or otherwise pursuant to the Collateral Documents, and any other Obligations owing to Agent in respect of sums advanced by Agent to preserve or protect the Collateral or to preserve or protect its security interest in the Collateral (other than fees not otherwise included in an invoice provided by Agent pursuant to Section 2.1.0.1 for such Payment Date for which invoices have been delivered to the Borrower no later than two (2) Business Days prior to such Payment Date);

 

(ii)SECOND, to the payment of all fees, costs, expenses and indemnities due and owing to Lenders in respect of the Loans and Commitments pursuant to Sections 2.7, 3.1, 3.2, 6.3(d), 10.4 and/or 10.5 under this Agreement or otherwise pursuant to the Collateral Documents, pro rata based on each Lender’s Pro Rata Term Loan Share, until Paid in Full;

 

(iii)THIRD, to the payment of all accrued but unpaid interest in respect of the Loans as of such Payment Date, pro rata based on each Lender’s Pro Rata Term Loan Share, until Paid in Full;

 

(iv)FOURTH, as it relates to each Payment Date on or after the Payment Date occurring in May 2021 (or if the Extension Conditions are satisfied, the Payment Date occurring in May 2022) to the payment of all principal of the Loans, pro rata based on each Lender’s Pro Rata Term Loan Share, up to an aggregate amount of $700,000 on any such Payment Date;

 

 

(v)

FIFTH, all remaining amounts to the Borrower.

 

In the event that the amounts distributed under this clause (b) on any Payment Date are insufficient for payment of the amounts set forth in clauses (i) through (iii) above for such Payment Date, Borrower shall pay an amount equal to the extent of such insufficiency within five (5) Business Days (or such longer period as Agent may agree in its sole discretion) of request by Agent. For the avoidance of doubt, at all times prior to the Payment Date in May 2021 (or if the Interest Only Extension Conditions are satisfied, the Payment Date occurring in May 2022), Borrower shall only be required to pay Revenue-Based Payments to the extent of amounts owing under clauses (i), (ii), and (iii) above on each such Payment Date prior to the Payment Date in May 2021 (or if the Extension Conditions are satisfied, the Payment Date occurring in May 2022).

 

(c)In the event that Borrower makes any adjustment to Aggregate Revenue after it has been reported to Agent, and such adjustment results in an adjustment to the Revenue-Based Payment due to the Lenders pursuant to this Section 2.9.1, Borrower shall so notify Agent and such adjustment shall be captured, reported and reconciled with the next scheduled report and payment of Revenue-Based Payment hereunder, but in no event shall the failure to have paid any amount that has been adjusted in accordance with this Section 2.9.1(d) result in an Event of Default to the extent such amounts

 

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are paid in full on the next Payment Date. Notwithstanding the foregoing, Agent and Borrower shall discuss and agree on the amount of any such adjustment prior to it being given effect with respect to future Revenue- Based Payments.

 

 

2.9.2

Principal.

 

Notwithstanding the foregoing, the outstanding principal balance of the Term Loan and all other Obligations then due and owing (including any amounts due pursuant to Section 2.8.2 hereof or any COC Prepayment Fee, as applicable, that may be due and owing on such date) shall be Paid in Full on the Termination Date.

 

 

2.10

Payment.

 

 

2.10.1

Making of Payments.

 

Except as set forth in the last sentence of this Section 2.10.1, all payments of principal, interest, fees and other amounts, shall be made in immediately-available funds, via wire transfer as directed by Agent in writing, not later than 2:00 p.m. Dallas time on the date due, and funds received after that hour shall be deemed to have been received by Agent on the following Business Day. Not later than two (2) Business Days prior to each Payment Date, Agent shall provide to Borrower and each Lender a quarterly statement with the amounts payable by Borrower to Agent on such Payment Date in accordance with Section 2.9.1(b) and (c) hereof, which shall include, for additional clarity, Agent’s calculation of the Revenue-Based Payment for the prior Fiscal Quarter, which statement shall be binding on Borrower absent manifest error, and Borrower shall be entitled to rely on such quarterly statement in relation to its payment obligations on such Payment Date.

 

 

2.10.2

Application of Payments and Proceeds Following an Event of Default.

 

Following the occurrence and during the continuance of an Event of Default, or if the Obligations have otherwise become or have been declared to become immediately due and payable in accordance with this Agreement, then notwithstanding anything herein or in any other Loan Document to the contrary, Agent shall apply all or any part of payments in respect of the Obligations and proceeds of Collateral, in each case as received by Agent, to the payment of the Obligations in the order and priority as determined by Agent in its sole discretion.

 

 

2.10.3

Set-off.

 

Borrower agrees that Agent and each Lender and its Affiliates have all rights of set-off and bankers’ lien provided by applicable law, and in addition thereto, Borrower agrees that at any time an Event of Default exists and is continuing, Agent and each Lender may, subject to Section 2.10.4, to the fullest extent permitted by applicable law, apply to the payment of any Obligations of Borrower hereunder then due, any and all balances, credits, deposits, accounts or moneys of Borrower then or thereafter with Agent or such Lender. Notwithstanding the foregoing, no Lender shall exercise any rights described in the preceding sentence without the prior written consent of Agent.

 

 

2.10.4

Proration of Payments.

 

If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of set-off or otherwise, on account of principal of, interest on or fees in relation to any Loan, but excluding any payment pursuant to Section 3.1, 3.2, 10.5 or 10.8) in excess of its applicable Pro Rata Term Loan Share of payments and other recoveries obtained by all Lenders on account of principal

 

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of, interest on or fees in relation to such Term Loan then held by them, then such Lender shall purchase from the other Lenders such participations in the Loans held by them as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and the purchase price restored to the extent of such recovery.

 

Section 3Yield Protection.

 

 

3.1

Taxes.

 

(a)All payments of principal and interest on the Loans and all other amounts payable hereunder by or on behalf of Borrower to or for the account of Agent or any Lender shall be made free and clear of and without deduction for any present or future income, excise, stamp, documentary, property or franchise taxes and other taxes, fees, duties, levies, withholdings or other similar charges imposed by any Governmental Authority that is a taxing authority (“Taxes”), excluding (i) taxes imposed on or measured by Agent’s or any Lender’s net income (however denominated) or gross profits, and franchise taxes, imposed by any jurisdiction (or subdivision thereof) under the laws of which Agent or such Lender is organized or in which Agent or such Lender conducts business or, in the case of any Lender, in which its applicable lending office is located, (ii) any branch profit taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which Agent or a Lender is located or conducts business; (iii) in the case of any Foreign Lender, any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement or designates a new lending office; (iv) in the case of any U.S. Lender, any United States federal backup withholding tax; and (v) taxes imposed under FATCA (items in clauses (i) through (v), “Excluded Taxes”, and all Taxes other than Excluded Taxes, “Indemnified Taxes”). If any withholding or deduction from any payment to be made by Borrower hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then Borrower shall: (w) make such withholding or deduction; (x) pay directly to the relevant Governmental Authority the full amount required to be so withheld or deducted; (y) as promptly as practicable forward to Agent the original or a certified copy of an official receipt or other documentation reasonably satisfactory to Agent evidencing such payment to such Governmental Authority; and (z) if the withholding or deduction is with respect to Indemnified Taxes, pay to Agent for the account of Lenders such additional amount or amounts as is necessary to ensure that the net amount actually received by each Lender will equal the full amount such Lender would have received had no such withholding or deduction of Indemnified Taxes been required. To the extent that any amounts shall ever be paid by Borrower in respect of Indemnified Taxes, such amounts shall, for greater certainty, be considered to have accrued and to have been paid by Borrower as interest on the Loans.

 

(b)Borrower shall indemnify Agent and each Lender for any Indemnified Taxes paid by Agent or such Lender, as applicable, on or with respect to any payment by or on account of any obligation of Borrower hereunder, and any additions to Tax, penalties and interest paid by Agent or such Lender with respect to such Indemnified Taxes; provided that Borrower shall not have any obligation to indemnify any party hereunder for any Indemnified Taxes or additions to Tax, penalties or interest with respect thereto that result from or are attributable to such party’s own gross negligence or willful misconduct. Payment under this Section 3.1(b) shall be made within thirty (30) days after the date Agent or the Lender, as applicable, makes written demand therefor; provided, however, that if such written demand is made more than one-hundred eighty (180) days after the earlier of (i) the date on which Agent or the Lender, as applicable, pays such Indemnified Taxes or additions to Tax, penalties or interest with respect thereto and

(ii) the date on which the applicable Governmental Authority makes written demand on Agent or such Lender, as applicable, for payment of such Indemnified Taxes or additions to Tax, penalties or interest with respect thereto, then Borrower shall not be obligated to indemnify Agent or such Lender for such Indemnified Taxes or additions to Tax, penalties or interest with respect thereto.

 

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(c)Each Foreign Lender that is a party hereto on the Closing Date or becomes an assignee of an interest under this Agreement under Section 10.8.1 after the Closing Date (unless such Lender was already a Lender hereunder immediately prior to such assignment) shall deliver to Borrower and Agent on or prior to the date on which such Foreign Lender becomes a party to this Agreement:

 

(i)Two duly completed and executed originals of IRS Form W-8BEN (or IRS Form W-8BENE) claiming exemption from withholding of Taxes under an income tax treaty to which the United States of America is a party;

 

 

(ii)

two duly completed and executed originals of IRS Form W-8ECI;

 

(iii)a certificate in form and substance reasonably satisfactory to Agent and Borrower claiming entitlement to the portfolio interest exemption under Section 881(c) of the IRC and certifying that such Foreign Lender is not (x) a “bank” within the meaning of Section 881(c)(3)(A) of the IRC, (y) a “10 percent shareholder” of Borrower within the meaning of Section 881(c)(3)(B) of the IRC, or (z) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the IRC, together with two duly completed and executed originals of IRS Form W-8BEN (or IRS Form W-8BENE); or

 

(iv)if the Foreign Lender is not the beneficial owner of amounts paid to it hereunder, two duly completed and executed originals of IRS Form W-8IMY, each accompanied by a duly completed and executed IRS Form W-8ECI, IRS Form W-8BEN (or IRS Form W- 8BENE), IRS Form W-9 or a portfolio interest certificate described in clause (iii) above from each beneficial owner of such amounts claiming entitlement to exemption from withholding or backup withholding of Taxes.

 

Each Foreign Lender shall (to the extent legally entitled to do so) provide updated forms to Borrower and Agent on or prior to the date any prior form previously provided under this clause (c) becomes obsolete or expires, after the occurrence of an event requiring a change in the most recent form or certification previously delivered by it pursuant to this clause (c) or from time to time if requested by Borrower or Agent. Each U.S. Lender shall deliver to Agent and Borrower on or prior to the date on which such Lender becomes a party to this Agreement (and from time to time thereafter upon the request of Borrower or Agent) properly completed and executed originals of IRS Form W-9 certifying that such Lender is exempt from backup withholding. Notwithstanding anything to the contrary contained in this Agreement, Borrower shall not be required to pay additional amounts to or indemnify any Lender pursuant to this Section 3.1 with respect to any Taxes required to be deducted or withheld (or any additions to Tax, penalties or interest with respect thereto) (A) on the basis of the information, certificates or statements of exemption provided by a Lender pursuant to this clause (c), or (B) if such Lender shall fail to comply with the certification requirements of this clause (c).

 

(d)Without limiting the foregoing, each Lender shall timely comply with any certification, documentation, information or other reporting necessary to establish an exemption from withholding under FATCA and shall provide any documentation reasonably requested by Borrower or Agent sufficient for Borrower and Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such applicable reporting requirements.

 

(e)If Agent or a Lender determines that it is entitled to or has received a refund of any Taxes for which it has been indemnified by Borrower (or another Loan Party) or with respect to which Borrower (or another Loan Party) shall have paid additional amounts pursuant to this Section 3.1, it shall promptly notify Borrower of such refund, and promptly make an appropriate claim to the relevant Governmental Authority for such refund (if it has not previously done so). If Agent or a Lender receives a

 

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refund (whether or not pursuant to such claim) of such Taxes, it shall promptly pay over such refund to Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by Loan Parties under this Section 3.1 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses of the Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided that Borrower, upon the request of Agent or such Lender, agrees to repay to Agent or such Lender the amount paid over to Borrower in the event Agent or such Lender is required to repay such refund to such Governmental Authority. This Section 3.1(e) shall not be construed to require Agent or any Lender to make available its Tax returns (or any other information relating to its Taxes which it deems confidential) to Borrower or any other Person or to alter its internal practices or procedures with respect to the administration of Taxes.

 

 

3.2

Increased Cost.

 

(a)If, after the Closing Date, the adoption of, or any change in, any applicable law, rule or regulation, or any change in the interpretation or administration of any applicable law, rule or regulation by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof (provided that notwithstanding anything herein to the contrary, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith shall be considered a change in applicable law, regardless of the date enacted, adopted or issued), or compliance by any Lender with any request or directive (whether or not having the force of law) issued after the Closing Date of any such authority, central bank or comparable agency: (i) shall impose, modify or deem applicable any reserve (including any reserve imposed by the FRB), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by any Lender; or (ii) shall impose on any Lender any other condition affecting its ability to make loans based on the LIBOR Rate or its obligation to make loans based on the LIBOR Rate; and the result of anything described in clauses (i) and (ii) above is to increase the cost to (or to impose a cost on) such Lender of making or maintaining any loan based on the LIBOR Rate, or to reduce the amount of any sum received or receivable by such Lender under this Agreement or under its Note with respect thereto, then upon demand by such Lender (which demand shall be accompanied by a statement setting forth the basis for such demand and a calculation of the amount thereof in reasonable detail, a copy of which shall be furnished to Agent), and without duplication of other payment obligations of Borrower hereunder (including pursuant to Section 3.1), Borrower shall pay directly to such Lender such additional amount as will compensate such Lender for such increased cost or such reduction, so long as such amounts have accrued on or after the day which is one-hundred eighty (180) days prior to the date on which such Lender first made demand therefor; provided that if the event giving rise to such costs or reductions has retroactive effect, such one-hundred eighty (180) day period shall be extended to include the period of retroactive effect. For the avoidance of doubt, this clause (a) will not apply to any such increased costs or reductions resulting from Taxes, as to which Section 3.1 shall govern.

 

(b)If any Lender shall reasonably determine that any change after the Closing Date in, or the adoption or phase-in after the Closing Date of, any applicable law, rule or regulation regarding capital adequacy, or any change after the Closing Date in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or the compliance by any Lender or any Person controlling such Lender with any request or directive issued after the Closing Date regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency (provided that notwithstanding anything herein to the contrary, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith shall be considered a change in applicable law, regardless of the date enacted, adopted or issued), has or would have the effect of reducing the rate of return on such Lender’s or such controlling Person’s capital as a consequence of such Lender’s obligations hereunder to a level below that which such Lender or such controlling Person

 

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could have achieved but for such change, adoption, phase-in or compliance (taking into consideration such Lender’s or such controlling Person’s policies with respect to capital adequacy) by an amount deemed by such Lender or such controlling Person to be material, then from time to time, within five (5) Business Days of demand by such Lender (which demand shall be accompanied by a statement setting forth the basis for such demand and a calculation of the amount thereof in reasonable detail, a copy of which shall be furnished to Agent), Borrower shall pay to such Lender such additional amount as will compensate such Lender or such controlling Person for such reduction, so long as such amounts have accrued on or after the day which is one-hundred eighty (180) days prior to the date on which such Lender first made demand therefor; provided that if the event giving rise to such costs or reductions has retroactive effect, such one-hundred eighty (180) day period shall be extended to include the period of retroactive effect.

 

(c)Each Lender agrees that, as promptly as practicable after the officer of such Lender responsible for administering its Loans, becomes aware of the occurrence of an event or the existence of a condition that would entitle such Lender to receive payments under this Section 3.2, it will, to the extent not inconsistent with the internal policies of such Lender and any applicable legal or regulatory restrictions, use reasonable efforts to (i) make, issue, fund or maintain its Loans through another office of such Lender, or (ii) take such other measures as such Lender may deem reasonable, if as a result thereof the additional amounts which would otherwise be required to be paid to such Lender pursuant to this Section 3.2 would be materially reduced and if, as determined by such Lender in its sole discretion, the making, issuing, funding or maintaining of such Loans through such other office or in accordance with such other measures, as the case may be, would not otherwise adversely affect such Loans or the interests of such Lender; provided that such Lender will not be obligated to utilize such other office pursuant to this clause (c) unless Borrower agrees to pay all incremental expenses incurred by such Lender as a result of utilizing such other office as described above. A certificate as to the amount of any such expenses payable by Borrower pursuant to this clause (c) (setting forth in reasonable detail the basis for requesting such amount) submitted by such Lender to Borrower (with a copy to Agent) shall be conclusive absent manifest error.

 

 

3.3

Funding Losses.

 

Borrower hereby agrees that upon demand by any Lender (which demand shall be accompanied by a statement setting forth the basis for the amount being claimed, a copy of which shall be furnished to Agent), Borrower will indemnify such Lender against any net loss or expense which such Lender may sustain or incur (including any net loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund or maintain the Term Loan subject to the LIBOR Rate, as reasonably determined by such Lender) as a result of (a) any payment or prepayment of the Term Loan of such Lender on a date other than the Term Loan Maturity Date or (b) any failure of Borrower to borrow any Loan on a date specified therefor in a notice of borrowing pursuant to this Agreement. For the purposes of this Section 3.3, all determinations shall be made as if such Lender had actually funded and maintained the Term Loan through the purchase of deposits having a maturity corresponding to the Loan and bearing an interest rate equal to the LIBOR Rate during such period of time being measured.

 

 

3.4

Manner of Funding; Alternate Funding Offices.

 

Notwithstanding any provision of this Agreement to the contrary, each Lender shall be entitled to fund and maintain its funding of all or any part of its Loans in any manner it may determine at its sole discretion. Each Lender may, if it so elects, fulfill its commitment to make the Term Loan by causing any branch or Affiliate of such Lender to make such Loan; provided that in such event for the purposes of this Agreement (other than Section 3.1) such Loan shall be deemed to have been made by such Lender and the obligation of Borrower to repay such Loan shall nevertheless be to such Lender and shall be deemed held by it, to the extent of such Loan, for the account of such branch or Affiliate.

 

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3.5

Conclusiveness of Statements; Survival.

 

Determinations and statements of any Lender pursuant to Section 3.1, 3.2, 3.3 or 3.4 shall be conclusive absent demonstrable error. Lenders may use reasonable averaging and attribution methods in determining compensation under Sections 3.1 or 3.2, and the provisions of such Sections shall survive repayment of the Loans, cancellation of the Notes and termination of this Agreement.

 

Section 4Conditions Precedent.

 

The effectiveness of this Agreement and the obligation of each Lender to make its Loan hereunder is subject to the following conditions precedent, each of which shall be reasonably satisfactory in all respects (or waived by) to Agent.

 

 

4.1

Prior Debt.

 

The Prior Debt has been (or concurrently with the initial borrowing will be) paid in full and all related Liens have been (or concurrently with the initial borrowing will be) released.

 

 

4.2

Delivery of Loan Documents.

 

Borrower shall have delivered the following documents in form and substance reasonably acceptable to Agent (and, as applicable, duly executed and dated the Closing Date or an earlier date reasonably satisfactory to Agent):

 

(a)Loan Documents. The Loan Documents to which any Loan Party is a party, each duly executed by a Responsible Officer of each Loan Party and the other parties thereto (except Agent and the Lenders), and each other Person (except Agent and the Lenders) shall have delivered to Agent and Lenders the Loan Documents to which it is a party, each duly executed and delivered by such Person and the other parties thereto (except Agent and the Lenders).

 

 

(b)

Financing Statements. Properly completed Uniform Commercial Code financing

statements.

 

(c)Lien Searches. Copies of Uniform Commercial Code and state search reports listing all effective financing statements filed and other Liens of record against any Loan Party, with copies of any financing statements and applicable searches of the records of the U.S. Patent and Trademark Office and the U.S. Copyright Office performed with respect to each Loan Party, all in each U.S. jurisdiction reasonably determined by Agent.

 

 

(d)

Reserved.

 

(e)Payoff; Release. Customary payoff letters with respect to the repayment in full of all Prior Debt, termination of all agreements relating thereto and the release of all Liens granted in connection therewith, with Uniform Commercial Code or other appropriate termination statements and documents effective to evidence the foregoing or authorization to file the same.

 

(f)Authorization Documents. For each Loan Party, such Person’s (i) charter (or similar formation document), certified by the appropriate Governmental Authority, (ii) good standing certificates in its jurisdiction of incorporation (or formation) and in each other jurisdiction reasonably requested by Agent, (iii) bylaws (or similar governing document), (iv) resolutions of its board of directors (or similar governing body) approving and authorizing such Person’s execution, delivery and performance

 

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of the Loan Documents to which it is party and the transactions contemplated thereby, and (v) signature and incumbency certificates of its officers executing any of the Loan Documents, all certified by its secretary or an assistant secretary (or similar officer) as being in full force and effect without modification, in form and substance reasonably satisfactory to Agent.

 

(g)Closing Certificate. A certificate executed by a Responsible Officer of Borrower, which shall constitute a representation and warranty by Borrower as of the Closing Date that the conditions contained in Section 4.5 and Section 4.9 have been satisfied.

 

(h)Opinions of Counsel. Customary opinions of U.S. counsel for each Loan Party in form and substance reasonably acceptable to Agent regarding certain customary closing matters, and Borrower hereby requests such counsel to deliver such opinions and authorizes Agent and Lenders to rely thereon.

 

(i)Insurance. (Certificates or other evidence of insurance in effect as required by Section 6.3(c) and (d), naming Agent as lenders’ loss payee and/or additional insured, as applicable.

 

(j)Solvency Certificate. Agent shall have received a certificate of the chief financial officer (or, in the absence of a chief financial officer, the chief executive officer or manager) of Borrower, in his or her capacity as such and not in his or her individual capacity, in form and substance reasonably satisfactory to Agent, certifying that Borrower and its Subsidiaries on a consolidated basis are Solvent after giving effect to the transactions and the indebtedness contemplated by the Loan Documents.

 

(k)Financials. The financial statements, projections and pro forma balance sheet described in Section 5.4.

 

 

(l)

Reserved.

 

(m)Consents. Evidence that all necessary consents, permits and approvals (governmental or otherwise) required for the execution, delivery and performance by each Loan Party of the Loan Documents have been duly obtained and are in full force and effect.

 

4.3Fees. The Lenders and Agent shall have received all reasonable and documented fees required to be paid, and all reasonable and documented expenses for which invoices have been presented (including the Legal Costs), required to be paid under the Loan Documents on or before the Closing Date; provided that Legal Costs shall be limited to those of a single firm of counsel for the Agent and the Lenders, taken as a whole (and, in the case of an actual or perceived conflict of interest, one additional firm of counsel for all similarly affected indemnitees), and, if reasonably necessary, by a single firm of local counsel in each relevant jurisdiction (which may include a single firm of special counsel acting in multiple jurisdictions) for the Agent and the Lenders taken as a whole (and, in the case of an actual or perceived conflict of interest, one additional firm of local counsel in each relevant jurisdiction for similarly affected indemnitees). All such amounts will be paid with proceeds of the initial advance of the Term Loan and any previous expense deposits made with Agent on or before the Closing Date and will be reflected in the funding instructions given by Borrower to Agent on or before the Closing Date.

 

 

4.4

Closing Date Warrant. Agent shall have received the fully executed Closing Date Warrant.

 

4.5Representations, Warranties, Defaults. As of the Closing Date, after giving effect to the making of the Loans, (a) all representations and warranties of Borrower set forth in any Loan Document shall be true and correct in all material respects as if made on and as of the Closing Date (except for representations and warranties that specifically refer to an earlier date, which shall be true and correct in all

 

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material respects as of such earlier date) and (b) no Default or Event of Default shall exist and be continuing. The acceptance of the Term Loan by Borrower shall be deemed to be a certification by Borrower that the conditions set forth in this Section 4.5 have been satisfied.

 

 

4.6

Reserved.

 

 

4.7

Reserved.

 

 

4.8

Reserved.

 

4.9No Material Adverse Effect. There shall not be any Debt or material obligations (other than those permitted pursuant to Section 7.1 hereof or as otherwise set forth in the Schedules to this Agreement or in quarterly and annual reports filed by the Company with the SEC) of any nature with respect to any Loan Party which could reasonably be likely to have a Material Adverse Effect.

 

Section 5Representations and Warranties.

 

To induce Agent and Lenders to enter into this Agreement and to induce Lenders to make the Loan hereunder, Borrower represents and warrants to Agent and Lenders, as of the Closing Date that:

 

 

5.1

Organization.

 

Each Loan Party is validly existing and in good standing under the laws of its state or country of jurisdiction as set forth on Schedule 5.1, and is duly qualified to do business in each jurisdiction set forth on Schedule 5.1, which are all of the jurisdictions in which failure to so qualify could reasonably be likely to have or result in a Material Adverse Effect.

 

 

5.2

Authorization; No Conflict.

 

Each Loan Party is duly authorized to execute and deliver each Loan Document to which it is a party, to borrow or guaranty monies hereunder, as applicable, and to perform its Obligations under each Loan Document to which it is a party. The execution, delivery and performance by each Loan Party of this Agreement and the other Loan Documents to which it is a party, as applicable, and the transactions contemplated therein, do not and will not (a) require any consent or approval of any applicable Governmental Authority (other than any consent or approval which has been obtained and is in full force and effect), (b) conflict with (i) any provision of applicable law (including any Health Care Law), (ii) the charter, by-laws or other organizational documents of such Loan Party or (iii) (except as it relates to the documents governing the Prior Debt, each of which will be terminated and/or paid on the Closing Date) any Material Contract, or any judgment, order or decree, which is binding upon any Loan Party or any of its properties or (c) require, or result in, the creation or imposition of any Lien on any asset of any Loan Party (other than Liens in favor of Agent created pursuant to the Collateral Documents), except, in each case, which could not reasonably be expected to result in a material adverse effect on the ability of the Borrower and its Subsidiaries, taken as a whole, to perform their obligations hereunder.

 

 

5.3

Validity; Binding Nature.

 

Each of this Agreement and each other Loan Document to which any Loan Party is a party, as applicable, is the legal, valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting the enforceability of creditors’ rights generally and to general principles of equity and concepts of reasonableness.

 

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5.4

Financial Condition.

 

(a)The audited consolidated financial statements of Borrower for the Fiscal Year 2017 and the unaudited consolidated financial statements of Borrower for the Fiscal Quarters ended March 31, 2018, June 30, 2018 and September 30, 2018, copies of each of which have been delivered pursuant hereto, were prepared in accordance with GAAP and present fairly in all material respects the consolidated financial condition of Borrower as at such dates and the results of its operations for the periods then ended.

 

(b)The consolidated financial projections (including an operating budget and a cash flow budget) of Borrower and its Subsidiaries for the period ending December 31, 2022 delivered to Agent and Lenders on or prior to the Closing Date (i) were prepared by Borrower in good faith and (ii) were prepared in accordance with assumptions for which Borrower believes it has a reasonable basis, and the accompanying consolidated pro forma unaudited balance sheet of Borrower and its Subsidiaries as at the Closing Date, adjusted to give effect to the financings contemplated hereby as if such transactions had occurred on such date, is consistent in all material respects with such projections (it being understood that the projections are not a guaranty of future performance and that actual results during the period covered by the projections may materially differ from the projected results therein).

 

 

5.5

No Material Adverse Change.

 

Since December 31, 2017, except as disclosed in quarterly and annual reports filed by the Company with the SEC, there has been no change in the financial condition, operations, assets, business or properties of Borrower and its Subsidiaries, taken as a whole, which could not reasonably be expected to result in a material adverse effect on the ability of the Borrower and its Subsidiaries, taken as a whole, to perform their obligations hereunder.

 

 

5.6

Litigation.

 

Except as disclosed in quarterly and annual reports filed by the Company with the SEC, no litigation (including derivative actions), arbitration proceeding or governmental investigation or proceeding is pending or, to Borrower’s knowledge, threatened against any Loan Party that would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect. As of the Closing Date, other than any liability incidental to such litigation or proceedings, no Loan Party has any material Contingent Obligations not listed on Schedule 7.1 or disclosed in the financial statements specified in Section 5.4(a).

 

 

5.7

Ownership of Properties; Liens.

 

Borrower and each other Loan Party owns, or leases or licenses, as applicable, all of its material properties and assets, tangible and intangible, of any nature whatsoever that it purports to own, or lease, as applicable (including Intellectual Property), free and clear of all Liens and charges and claims (including infringement claims with respect to Intellectual Property), except Permitted Liens and as set forth on Schedule 5.7.

 

 

5.8

Capitalization.

 

All issued and outstanding Equity Interests of the Loan Parties that are Subsidiaries of the Borrower are duly authorized, validly issued, fully paid, non-assessable, and such securities were issued in compliance in all material respects with all applicable state and federal laws concerning the issuance of securities. Schedule 5.8 sets forth the authorized Equity Interests of each of the Loan Parties that is a

 

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Subsidiary of the Borrower as of the Closing Date as well as all Persons owning more than ten percent (10%) of the outstanding Equity Interests in each such Loan Party as of the Closing Date.

 

 

5.9

Pension Plans.

 

No Loan Party has, nor to Borrower’s knowledge has any Loan Party ever had, a Pension

Plan.

 

 

5.10

Investment Company Act.

 

No Loan Party is an “investment company” or a company “controlled” by an “investment company” or a “subsidiary” of an “investment company”, within the meaning of the Investment Company Act of 1940.

 

 

5.11

No Default.

 

No Event of Default or Default exists or would result from the incurrence by Borrower of any Debt hereunder or under any other Loan Document or as a result of any Loan Party entering into the Loan Documents to which it is a party.

 

 

5.12

Margin Stock.

 

No Loan Party is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock. As of the Closing Date, no portion of the Obligations is secured directly or indirectly by Margin Stock.

 

 

5.13

Taxes.

 

Each Loan Party has filed, or caused to be filed, all material federal and material state taxes returns and reports required by applicable U.S. state and U.S. federal law to have been filed by it and has paid all material federal and material state taxes and governmental charges thereby shown to be owing, except any such taxes or charges (a) that are not delinquent or (b) that are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been set aside on its books. Except as would not, either individually or in the aggregate, reasonably be expected to result in a material adverse effect on the ability of the Borrower and its Subsidiaries, taken as a whole, to perform their obligations hereunder, each Loan Party has filed, or caused to be filed, all material foreign and other (non-state or U.S.) material tax returns and reports required by foreign law to have been filed by it and has paid all material foreign and other (non-state or U.S.) taxes and governmental charges thereby shown to be owing, except any such taxes or charges (a) that are not delinquent or (b) that are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been set aside on its books.

 

 

5.14

Solvency.

 

On the Closing Date, and immediately prior to and after giving effect to the borrowing hereunder and the use of the proceeds hereof, Borrower and its Subsidiaries on a consolidated basis are, and will be, Solvent.

 

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5.15

Environmental Matters.

 

The on-going operations of Loan Parties comply in all respects with all applicable Environmental Laws, except for non-compliance which could not (if enforced in accordance with applicable law) reasonably be expected to result in a Material Adverse Effect. Each Loan Party has obtained, and maintained in good standing, all licenses, permits, authorizations and registrations required under any Environmental Law and necessary for its respective ordinary course operations, and each Loan Party is in compliance with all material terms and conditions thereof, in each case, except where the failure to do so would not reasonably be expected to result in a Material Adverse Effect. Neither Borrower, any of its Subsidiaries nor any of their respective properties or operations is subject to any outstanding written order from or agreement with any applicable federal, state, or local Governmental Authority, nor subject to any judicial or docketed administrative proceeding, respecting any Environmental Law, Environmental Claim or Hazardous Substance, in each case, that would reasonably be expected to result in a Material Adverse Effect. There are no Hazardous Substances or other conditions or circumstances existing with respect to any property, or arising from operations prior to the Closing Date, of any Loan Party that would reasonably be expected to result in a Material Adverse Effect.

 

 

5.16

Insurance.

 

Loan Parties and their respective properties are insured with financially sound and reputable insurance companies which are not Affiliates of any Loan Party, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where such Loan Parties operate, as applicable. A true and complete listing of such insurance as of the Closing Date, including issuers, coverages and deductibles, is set forth on Schedule 5.16.

 

 

5.17

Information.

 

All written information (other than projections, or other forward-looking information and information of a general economic or industry nature) heretofore or contemporaneously herewith furnished in writing by Borrower to Agent or any Lender for purposes of or in connection with this Agreement and the transactions contemplated hereby, taken as a whole, is true and accurate in every material respect on the date as of which such information, taken as a whole, and none of such information was materially incomplete by omitting to state any material fact necessary to make such information not materially misleading in any material respect in light of the circumstances under which made (after giving effect to all supplements and updates thereto from time to time) (it being recognized by Agent and Lenders that any projections and forecasts, taken as a whole, provided by Borrower are based on good faith estimates and assumptions believed by Borrower to be reasonable as of the date of the applicable projections or assumptions and that actual results during the period or periods covered by any such projections and forecasts may differ from projected or forecasted results).

 

 

5.18

Intellectual Property; Products and Services.

 

(a)Schedule 5.18(a) (as updated from time to time in accordance with Section 6.1.2 hereof) accurately and completely lists all of Loan Parties’ Registered Intellectual Property. Each Loan Party owns and possesses or has a license or other right to use all material Intellectual Property as is necessary for the conduct of the business of such Loan Party, and to the knowledge of such Loan Party, without any infringement upon the intellectual property rights of others, except as otherwise set forth on Schedule 5.18(a) hereto.

 

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(b)Schedule 5.18(b) (as updated from time to time in accordance with Section 6.1.2 hereof) accurately and completely lists all Products and Services.

 

(c)With respect to any Product or Service that are material to the business of the Loan Parties, taken as a whole, and that are being tested, manufactured, marketed, sold, and/or delivered by Loan Parties, the applicable Loan Party has received (or the applicable, authorized third parties have received), and such Product or Service is the subject of, all Required Permits needed in connection with the testing, manufacture, marketing, sale, and/or delivery of such Product or Service by or on behalf of Loan Parties as currently conducted. No Loan Party has received any written notice from any applicable Governmental Authority, specifically including the FDA and/or CMS, that such Governmental Authority is conducting an investigation or review (other than a normal routine scheduled inspection) of any Loan Party’s (x) manufacturing facilities, laboratory facilities, the processes for any such Product that is material to the business of the Loan Parties, taken as a whole, or any related sales or marketing activities and/or the Required Permits related to such material Product, and (y) laboratory facilities, the processes for any such Services that are material to the business of the Loan Parties, taken as a whole, or any related sales or marketing activities and/or the Required Permits related to such material Services. There are no material deficiencies or violations of applicable laws in relation to the manufacturing, processes, sales, marketing, or delivery of any such Product or Services that are material to the business of the Loan Parties, taken as a whole, and/or the Required Permits related to such material Product or Services, and, except as disclosed in quarterly and annual reports filed by the Company with the SEC, no Required Permit has been revoked or withdrawn, nor, to the best of Borrower’s knowledge, has any such Governmental Authority issued any order or recommendation stating that the development, testing, manufacturing, sales and/or marketing of such material Product or Services by or on behalf of Loan Parties should cease or be withdrawn from the marketplace, as applicable, that, in each case, is material to the business of the Loan Parties, taken as a whole.

 

(d)Except as set forth on Schedule 5.18(b), (A) there have been no adverse clinical trial results in respect of any Product that is material to the business of the Loan Parties, taken as a whole, since the date on which the applicable Loan Party acquired rights to such material Product, and (B) there have been no product recalls or voluntary product withdrawals from any market in respect of any Product that is material to the business of the Loan Parties, taken as a whole, since the date on which the applicable Loan Party acquired rights to such material Product.

 

(e)Since January 1, 2016, no Loan Party has experienced any significant failures in its manufacturing of any Product which caused any reduction in Products sold.

 

 

5.19

Restrictive Provisions.

 

No Loan Party is a party to any agreement or contract or subject to any restriction contained in its operative documents which would reasonably be expected to have a Material Adverse Effect.

 

 

5.20

Labor Matters.

 

No Loan Party is subject to any labor or collective bargaining agreement. There are no existing or threatened strikes, lockouts or other labor disputes involving any Loan Party that singly or in the aggregate would reasonably be expected to have a Material Adverse Effect. Hours worked by and payment made to employees of each Loan Party are not in violation in any material respect of the Fair Labor Standards Act or any other applicable law, rule or regulation dealing with such matters.

 

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5.21

Material Contracts.

 

Except for the agreements set forth on Schedule 5.21 or in the exhibit list to the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2017 or any quarterly report on Form 10-Q filed by the Company with the SEC in 2018 (collectively, the Material Contracts”), as of the Closing Date there are no (i) employment agreements covering the management of any Loan Party, (ii) collective bargaining agreements or other labor agreements covering any employees of any Loan Party, (iii) agreements for managerial, consulting or similar services to which any Loan Party is a party or by which it is bound, (iv) agreements regarding any Loan Party, its assets or operations or any investment therein to which such Loan Party and any of holder of 5.0% or more of its equity that has filed a Schedule 13D or 13G are a party, (v) Patent Licenses, Trademark Licenses, Copyright Licenses or other lease or license agreements to which any Loan Party is a party, either as lessor or lessee, or as licensor or licensee (other than software subject to “shrink-wrap” or “click-through” software licenses), (vi) distribution, marketing or supply agreements to which any Loan Party is a party, (vii) customer agreements to which any Loan Party is a party (in each case with respect to any agreement of the type described in the preceding clauses (i), (iii), (iv), (v), (vi) and (vii) requiring payments in the aggregate of more than $500,000 in any year),

(viii)partnership agreements pursuant to which any Loan Party is a partner, limited liability company agreements pursuant to which any Loan Party is a member or manager, or joint venture agreements to which any Loan Party is a party (in each case other than the applicable Loan Parties’ organizational documents),

(ix)real estate leases, or (x) any other agreements or instruments to which any Loan Party is a party, in each case the breach, nonperformance or cancellation of which, would reasonably be expected to have a Material Adverse Effect. Schedule 5.21 sets forth, with respect to each real estate lease agreement to which any Loan Party is a party as of the Closing Date, the address of the subject property. The consummation of the transactions contemplated by the Loan Documents will not give rise to a right of termination in favor of any party to any Material Contract (other than a Loan Party) which would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

 

 

5.22

Compliance with Laws; Health Care Laws.

 

(a)Laws Generally. Each Loan Party is in compliance with, and is conducting and has conducted its business and operations in material compliance with the requirements of all applicable laws, rules, regulations, decrees, orders, judgments, licenses and permits except where the failure to be in compliance would not reasonably be expected to have a Material Adverse Effect.

 

 

(b)

Health Care Laws. Without limiting the generality of clause (a) above:

 

(i)No Loan Party is in violation of any of the Health Care Laws, except for any such violation which would not reasonably be expected (either individually and taken as a whole with any other violations) to have a Material Adverse Effect.

 

(ii)Each Loan Party(either directly or through one or more authorized third parties) has (i) all licenses, consents, certificates, permits, authorizations, approvals, franchises, registrations, qualifications and other rights from, and has made all declarations and filings with, all applicable Governmental Authorities and self-regulatory authorities (each, an “Authorization”) necessary to engage in the business conducted by it, except for such Authorizations with respect to which the failure to obtain would not reasonably be expected to have a Material Adverse Effect, and (ii) no knowledge that any Governmental Authority is considering limiting, suspending or revoking any such Authorization, except where the limitation, suspension or revocation of such Authorization would not reasonably be expected to have a Material Adverse Effect. All such Authorizations are valid and in full force and effect and such Loan Party is in material compliance with the terms and conditions of all such Authorizations and with the rules and regulations of the

 

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regulatory authorities having jurisdiction with respect to such Authorizations, except where failure to be in such compliance or for an Authorization to be valid and in full force and effect could not reasonably be expected to have a Material Adverse Effect.

 

(iii)Each Loan Party has received and maintains accreditation in good standing and without limitation or impairment by all applicable accrediting organizations, to the extent required by applicable law or regulation (including any foreign law or equivalent regulation), except where the failure to be so accredited and in good standing without limitation would not reasonably be expected to have a Material Adverse Effect.

 

(iv)Except where any of the following would not reasonably be expected to have a Material Adverse Effect, no Loan Party has been, or has been threatened to be, (i) excluded from U.S. health care programs pursuant to 42 U.S.C. §1320(a)7 or any related regulations, (ii) “suspended” or “debarred” from selling products to the U.S. government or its agencies pursuant to the Federal Acquisition Regulation, relating to debarment and suspension applicable to federal government agencies generally (48 C.F.R. Subpart 9.4), or other applicable laws or regulations, or

(iii) made a party to any other action by any Governmental Authority that may prohibit it from selling products to any governmental or other purchaser pursuant to any federal, state or local laws or regulations.

 

(v)   No Loan Party has received any written notice from the FDA, CMS, or    any other Governmental Authority with respect to, nor to Borrower’s best knowledge is there, any actual or threatened investigation, inquiry, or administrative or judicial action, hearing, or enforcement proceeding by the FDA, CMS, or any other Governmental Authority against any Loan Party regarding any violation of applicable law, except for such investigations, inquiries, or administrative or judicial actions, hearings, or enforcement proceedings which, individually and in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

 

 

5.23

Existing Indebtedness; Investments, Guarantees and Certain Contracts.

 

Except as set forth on Schedule 7.1, as permitted by Section 7.1 or in the exhibit list to the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2017 or any quarterly report on Form 10-Q filed by the Company with the SEC in 2018, no Loan Party (a) has any outstanding Debt, except Debt under the Loan Documents, or (b) owns or holds any equity or long-term debt investments in, or has any outstanding advances to or any outstanding guarantees for the obligations of, or any outstanding borrowings from, any other Person.

 

 

5.24

Affiliated Agreements.

 

Except as set forth on Schedule 7.7 or in the exhibit list to the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2017 or any quarterly report on Form 10-Q filed by the Company with the SEC in 2018, and except for employment agreements entered into with employees, managers, officers and directors from time to time in the ordinary course of business, (i) there are no existing or proposed agreements, arrangements, understandings or transactions between any Loan Party, on the one hand, and such Loan Party’s members, managers, managing members, investors, officers, directors, stockholders, other equity holders, employees, or Affiliates or any members of their respective families, on the other hand, and (ii) to Borrower’s knowledge, none of the foregoing Persons are directly or indirectly, indebted to or have any direct or indirect ownership or voting interest in, any Affiliate of any Loan Party or any Person with which any Loan Party has a business relationship or which competes with any Loan Party (except that any such Persons may own equity interests in (but not exceeding two percent (2%) of the outstanding equity interests of) any publicly traded company that may compete with Loan Parties).

 

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5.25

Names; Locations of Offices, Records and Collateral; Deposit Accounts.

 

Since January 1, 2013, no Loan Party has conducted business under or used any name (whether corporate, partnership or assumed) other than such names set forth on Schedule 5.25A. Each Loan Party is the sole owner(s) of all of its respective names listed on Schedule 5.25A, and any and all business done and invoices issued in such names are such Loan Party’s sales, business and invoices. Each Loan Party maintains, and since January 1, 2013 has maintained, respective places of business only at the locations set forth on Schedule 5.25B, and all books and records of Loan Parties relating to or evidencing the Collateral are located in and at such locations (other than (i) Deposit Accounts, (ii) Collateral in the possession of Agent, for the benefit of Agent and Lenders, and (iii) other locations disclosed to Agent from time to time in writing). Schedule 7.14 lists all of Loan Parties’ Deposit Accounts as of the Closing Date. All of the tangible material Collateral (except for Inventory that is in transit or Equipment that is being repaired) is located exclusively within the United States.

 

 

5.26

Non-Subordination.

 

The payment and performance of the Obligations by Loan Parties are not subordinated in any way to any other obligations of such Loan Parties or to the rights of any other Person.

 

 

5.27

Reserved.

 

 

5.28

Anti-Terrorism; OFAC.

 

(a)No Loan Party, nor any Person Controlling or Controlled by a Loan Party, nor, to Borrower’s knowledge, any Person having a beneficial interest in a Loan Party, nor any Person for whom a Loan Party is acting as agent or nominee in connection with this transaction (1) is a Person whose property or interest in property is blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001, Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (2) engages in any dealings or transactions prohibited by Section 2 of such executive order, or is otherwise associated with any such Person in any manner that violates of Section 2 of such executive order, or (3) is a Person on the list of Specially Designated Nationals and Blocked Persons or is in violation of the limitations or prohibitions under any other OFAC regulation or executive order.

 

(b)No part of the proceeds of the Loan will be used, directly or indirectly, by any Loan Party for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

 

 

5.29

Security Interest.

 

Each Loan Party has full right and power to grant to Agent, for the benefit of itself and the other Lenders, a perfected, first priority (subject to Permitted Liens and the Intercreditor Agreement) security interest and Lien on the Collateral pursuant to this Agreement and the other Loan Documents, as applicable, subject to the following sentence. Subject to Section 6.14, upon the execution and delivery of this Agreement and the other Loan Documents, and upon the filing of the necessary financing statements and/or appropriate filings and/or delivery of the necessary certificates evidencing any equity interest, control and/or possession, as applicable, without any further action, Agent will have a good, valid and first priority (subject to Permitted Liens and the Intercreditor Agreement) perfected Lien and security interest in the U.S. Collateral, for the benefit of Agent and Lenders. Borrower is not party to any agreement, document

 

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or instrument that conflicts with this Section 5.29 other than in respect of Permitted Liens and the Intercreditor Agreement.

 

 

5.30

Survival.

 

Borrower hereby makes the representations and warranties contained herein with the knowledge and intention that Agent and Lenders are relying and will rely thereon. All such representations and warranties will survive the execution and delivery of this Agreement, the closing and the making of the Loan.

 

Section 6Affirmative Covenants.

 

Until all Obligations have been Paid in Full, Borrower agrees that, unless at any time Agent shall otherwise expressly consent in writing, it will:

 

 

6.1

Information.

 

Furnish to Agent (which shall furnish to each Lender):

 

 

6.1.1

Annual Report.

 

Promptly when available and in any event within ninety (90) days after the close of each Fiscal Year (unless Borrower files a Notice of Late Filing (12b-25 Notice) in which case such report shall be due within one hundred five (105) days of the end of the relevant Fiscal Year): a copy of the annual audited report of Borrower and its Subsidiaries for such Fiscal Year, including therein (a) a consolidated balance sheet and statement of earnings and cash flows of Borrower and its Subsidiaries as at the end of and for such Fiscal Year, certified without qualification (except for (x) qualifications relating to changes in accounting principles or practices reflecting changes in GAAP and required or approved by Borrower’s independent certified public accountants and (y) going concern qualification) by independent auditors of recognized standing selected by Borrower, and (b) a comparison with the previous Fiscal Year.

 

 

6.1.2

Interim Reports.

 

 

(a)

Promptly when available and in any event within forty-five (45) days:

 

(i)after the end of each of the first three Fiscal Quarters of each Fiscal Year (unless Borrower files a Notice of Late Filing (12b-25 Notice) in which case such report shall be due within fifty (50) days of the end of the relevant Fiscal Quarter), unaudited consolidated balance sheets of Borrower and its Subsidiaries as of the end of such Fiscal Quarter, together with consolidated statements of earnings and cash flows for such Fiscal Quarter and for the period beginning with the first day of such Fiscal Year and ending on the last day of such Fiscal Quarter, together with a comparison with the corresponding period of the previous Fiscal Year and a comparison with the budget for such period of the current Fiscal Year (which may be in preliminary form and subject to normal year-end audit adjustments and the absence of footnotes); and

 

(ii)after the end of the last Fiscal Quarter of each Fiscal Year, unaudited consolidated balance sheets of Borrower and its Subsidiaries as of the end of such Fiscal Quarter, together with consolidated statements of earnings for such Fiscal Quarter and for the period beginning with the first day of such Fiscal Year and ending on the last day of such Fiscal Quarter (which may be in preliminary form and subject to normal year-end audit adjustments and the absence of footnotes).

 

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(b)Together with each such quarterly report to be delivered pursuant to clause (a)(i) above, Borrower shall provide to Agent a written statement of Borrower’s management setting forth a summary discussion of Borrower’s financial condition, changes in financial condition and results of operations (which requirement shall be satisfied by the filing by Borrower with the SEC of Management’s Discussion and Analysis of Financial Condition and Results of Operations).

 

(c)Promptly when available and in any event within thirty (30) days after the end of each calendar month, monthly management and sales reports of Borrower and its Subsidiaries, which reports shall be in form and substance consistence with the past practice of the Borrower (as such form may be updated in the ordinary course of business of the Borrower.

 

 

6.1.3

Revenue-Based Payment Reconciliation.

 

Upon Agent’s request Borrower shall furnish to Agent, a report, in form acceptable to Agent, reconciling the Net Sales, Royalties, and other revenue realized on a consolidated basis in accordance with GAAP, in each case, reported by Borrower to Agent during any reporting period to the Aggregate Revenue reported by Borrower hereunder for such period and the amount of Revenue-Based Payment(s) made by Borrower in connection with such period(s).

 

 

6.1.4

Compliance Certificate.

 

Contemporaneously with the furnishing of a copy of each set of quarterly statements pursuant to Section 6.1.2, a duly completed Compliance Certificate, with appropriate insertions, dated the date of delivery and corresponding to such annual report or such quarterly statements, and signed by the chief financial officer (or other executive officer) of Borrower, containing a computation showing compliance with Section 7.13 and a statement to the effect that such officer has not become aware of any Event of Default or Default that exists or, if there is any such event, describing it and the steps, if any, being taken to cure it.

 

 

6.1.5

Reports to Governmental Authorities and Shareholders.

 

Promptly upon the filing or sending thereof, copies of (a) all regular, periodic or special reports of each Loan Party filed with any Governmental Authority, (b) all registration statements (or such equivalent documents) of each Loan Party filed with any Governmental Authority and (c) all proxy statements or other communications made to the holders of Borrower’s Equity Interests generally.

 

 

6.1.6

Notice of Default; Litigation.

 

Promptly upon becoming aware of any of the following, written notice describing the same and the steps being taken by Borrower or the applicable Loan Party affected thereby with respect thereto:

 

 

(a)

the occurrence of an Event of Default;

 

(b)any litigation, arbitration or governmental investigation or proceeding not previously disclosed by Borrower to Lenders which has been instituted or, to the knowledge of Borrower, is threatened in writing against Borrower or any other Loan Party or to which any of the properties of any thereof is subject, which in any case would reasonably be expected to have a Material Adverse Effect;

 

(c)the institution of any steps by any member of the Controlled Group or any other Person to terminate any Pension Plan, or the failure of any member of the Controlled Group to make

 

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a required contribution to any Pension Plan (if such failure is sufficient to give rise to a Lien under Section 303(k) of ERISA) or to any Multiemployer Pension Plan, or the taking of any action with respect to a Pension Plan which could result in the requirement that Borrower or any other Loan Party furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan or Multiemployer Pension Plan which could result in the incurrence by any member of the Controlled Group of any material liability, fine or penalty (including any claim or demand for withdrawal liability or partial withdrawal from any Multiemployer Pension Plan), or any material increase in the contingent liability of Borrower or any other Loan Party with respect to any post-retirement welfare plan benefit, or any notice that any Multiemployer Pension Plan is in reorganization, that increased contributions may be required to avoid a reduction in plan benefits or the imposition of an excise tax, that any such plan is or has been funded at a rate less than that required under Section 412 of the IRC, that any such plan is or may be terminated, or that any such plan is or may become insolvent;

 

(d)any cancellation or material adverse change in any material insurance maintained by Borrower or any other Loan Party;

 

(e)any other event (including (i) any violation of any applicable law, including any applicable Environmental Law, or the assertion in writing of any Environmental Claim or

(ii) the enactment or effectiveness of any applicable law, rule or regulation) which could reasonably be expected to have a Material Adverse Effect; or

 

(f)to the extent that it would reasonably be expected to result in a Material Adverse Effect (i) any suspension, revocation, cancellation or withdrawal of an Authorization required for Borrower or any other Loan Party, is threatened in writing or there is a reasonable basis for the Borrower to believe that such Authorization will not be renewable upon expiration or will be suspended, revoked, cancelled or withdrawn, (ii) Borrower or any other Loan Party enters into any consent decree or order pursuant to any Health Care Law and Regulation, or becomes a party to any judgment, decree or judicial or administrative order pursuant to any Health Care Law, (iii) receipt of any written notice or other written communication from the FDA, CMS, or any other applicable Governmental Authority alleging non- compliance with any applicable Health Care Law, (iv) the occurrence of any violation of any applicable Health Care Law by Borrower or any of the other Loan Parties in the development or provision of Services, and record keeping and reporting to the FDA or CMS that could reasonably be expected to require or lead to an investigation, corrective action or enforcement, regulatory or administrative action, (v) the occurrence of any civil or criminal proceedings relating to Borrower or any of the other Loan Parties or any of their respective employees, which involve a matter within or related to the FDA’s or CMS’ jurisdiction, (vi) upon obtaining actual knowledge thereof by the Borrower or any other Loan Party, any officer, employee or agent of Borrower (acting in his or her capacity as such) or any of the other Loan Parties is convicted of any crime or has engaged in any conduct for which debarment is mandated or permitted by 21 U.S.C. § 335a, or (vii) upon obtaining actual knowledge thereof by the Borrower or any other Loan Party, any officer, employee or agent of Borrower (acting in his or her capacity as such) or any of the other Loan Parties has been convicted of any crime or engaged in any conduct for which such Person could be excluded from participating in any federal, provincial, state or local health care programs under Section 1128 of the Social Security Act or any similar law or regulation.

 

 

6.1.7

Management Report.

 

Promptly upon receipt thereof, copies of all detailed financial and management reports submitted to Borrower or any other Loan Party by independent auditors in connection with each annual or interim audit made by such auditors of the books of Borrower or any other Loan Party.

 

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6.1.8

Projections.

 

As soon as practicable, and in any event not later than thirty (30) days after the commencement of each Fiscal Year, financial projections on a monthly basis of revenues and EBITDA for Borrower and the Subsidiaries for such Fiscal Year prepared in a manner consistent with the projections delivered by Borrower to Agent prior to the Closing Date or otherwise in a manner reasonably satisfactory to Agent, accompanied by a certificate of a chief financial officer (or other executive officer) of Borrower on behalf of Borrower to the effect that (a) such projections were prepared by them in good faith, (b) Borrower believes that it has a reasonable basis for the assumptions contained in such projections and

(c) such projections have been prepared in accordance with such assumptions.

 

 

6.1.9

Updated Schedules to Guarantee and Collateral Agreement.

 

Contemporaneously with the furnishing of each annual audit report pursuant to Section 6.1.1, updated versions of the Schedules to the Guarantee and Collateral Agreement showing information as of the date of such audit report (it being agreed and understood that this requirement shall be in addition to the notice and delivery requirements set forth in the Guarantee and Collateral Agreement).

 

 

6.1.10

Other Information.

 

Promptly, from time to time as Agent reasonably requests, Borrower shall deliver or shall cause to be delivered to Agent:

 

(a)copies of any reports, statements or written materials (other than routine communications (electronic or otherwise) between Borrower or its Affiliates and such entities that are not material in nature in the Borrower’s good faith determination) in relation to any Material Contract;

 

(b)such other information concerning Borrower and any other Loan Party as Agent may reasonably request;

 

(c)copies of all material communication as well as other material documents received by Loan Parties or any of their Subsidiaries from the FDA, CMS, or any other Governmental Authority; and

 

(d)copies of (x) any written notices or other communications relating to any material breach, default, or event of default with respect to any Debt listed on Schedule 7.1 and (y) any other material modifications or amendments entered into in relation to any Debt listed on Schedule 7.1.

 

 

6.2

Books; Records; Inspections.

 

Keep, and cause each other Loan Party to keep, its books and records in accordance with sound business practices sufficient to allow the preparation of financial statements in accordance with GAAP; permit, and cause each other Loan Party to permit (at any reasonable time during normal business hours and with reasonable advance notice), Agent or any representative thereof to inspect the properties and operations of Borrower or any other Loan Party; provided, however, that in the absence of an Event of Default, the Agent (or representative thereof) may not do any of the foregoing (or seek reimbursement for) more than one visit during any Fiscal Year and to the extent any information is subject to confidentiality obligations with a third party or attorney-client privilege or the sharing of such information is prohibited by law, then such information shall not be required to be delivered; and permit, and cause each other Loan Party to permit, at any reasonable time during normal business hours and with reasonable advance notice (or at any time without notice if an Event of Default exists), Agent or any representative thereof to visit any

 

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or all of its offices, to discuss its financial matters with its officers and its independent auditors (and Borrower hereby authorizes such independent auditors to discuss such financial matters with Agent or any representative thereof), and to examine (and, at the expense of Borrower or the applicable Loan Party, photocopy extracts from) any of its books or other records; provided, however, that in the absence of an Event of Default, the Agent (or representative thereof) may not do any of the foregoing (or seek reimbursement for) more than one visit during any Fiscal Year and to the extent any information is subject to confidentiality obligations with a third party or attorney-client privilege or the sharing of such information is prohibited by law, then such information shall not be required to be delivered.

 

 

6.3

Conduct of Business; Maintenance of Property; Insurance.

 

(a)Borrower shall, and shall cause each other Loan Party to, (i) conduct its business substantially in accordance with its current business practices, (ii) engage principally in the same or similar lines of business substantially as heretofore conducted, (iii) collect the Royalties in the ordinary course of business, (iv) maintain all of its Collateral used or useful in its business in good repair, working order and condition (normal wear and tear excepted and except as may be disposed of in the ordinary course of business and in accordance with the terms of the Loan Documents), (v) from time to time to make all necessary repairs, renewals and replacements to the Collateral; (vi) maintain and keep in full force and effect all material Permits and qualifications to do business and good standing in its jurisdiction of formation and each other jurisdiction in which the ownership or lease of property or the nature of its business makes such Permits or qualification necessary and in which failure to maintain such Permits or qualification could reasonably be expected to be, have or result in a Material Adverse Effect; (vii) remain in good standing and maintain operations in all jurisdictions in which it is currently located, except where the failure to remain in good standing or maintain operations would not reasonably be expected to be, have or result in a Material Adverse Effect, and (viii) maintain, comply with and keep in full force and effect all Intellectual Property and Permits necessary to conduct its business, except in each case where the failure to maintain, comply with or keep in full force and effect could not reasonably be expected to be, have or result in a Material Adverse Effect.

 

(b)Borrower shall keep, and cause each other Loan Party to keep, all property necessary in the business of Borrower or each other Loan Party in good working order and condition (normal wear and tear excepted and except as may be disposed of in the ordinary course of business and in accordance with the terms of the Loan Documents).

 

(c)Borrower shall maintain, and cause each other Loan Party to maintain, with responsible insurance companies, such insurance coverage as shall be required by all laws, governmental regulations and court decrees and orders applicable to it and such other insurance, to such extent and against such hazards and liabilities, as is customarily maintained by Persons operating in the same geographical region as Borrower that are (A) subject to applicable Health Care Laws, or (B) otherwise delivering to customers products or services similar to the Services (in each case, as determined by Agent in its reasonable discretion). Upon request of Agent or any Lender, Borrower shall furnish to Agent or such Lender a certificate setting forth in reasonable detail the nature and extent of all insurance maintained by Borrower and each other Loan Party. Borrower shall cause each issuer of an insurance policy to provide Agent with an endorsement (x) showing Agent as a lender’s loss payee with respect to each policy of property or casualty insurance and naming Agent as an additional insured with respect to each policy of liability insurance promptly upon request by Agent, (y) if insurance carrier agrees, providing that the insurance carrier will endeavor to give at least thirty (30) days’ prior written notice to Borrower and Agent (or ten (10) days’ prior written notice if the Agent consents to such shorter notice) before the termination or cancellation of the policy prior to the expiration thereof and (z) reasonably acceptable in all other respects to Agent. Borrower shall execute and deliver, and cause each other applicable Loan Party to execute and

 

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deliver, to Agent a collateral assignment, in form and substance reasonably satisfactory to Agent, of each business interruption insurance policy maintained by the Loan Parties.

 

(d)Unless Borrower provides Agent with evidence of the continuing insurance coverage required by this Agreement, Agent (upon reasonable advance notice to Borrower) may purchase such coverage at Borrower’s expense to protect Agent’s and Lenders’ interests in the Collateral. This insurance shall protect Borrower’s and each other Loan Party’s interests. The coverage that Agent purchases shall pay any claim that is made against Borrower or any other Loan Party in connection with the Collateral. Borrower may later cancel any insurance purchased by Agent, but only after providing Agent with evidence that Borrower has obtained the insurance coverage required by this Agreement. If Agent purchases insurance for the Collateral, as set forth above, Borrower will be responsible for the reasonable costs of that insurance, including interest and any other charges that may be imposed with the placement of the insurance, until the effective date of the cancellation or expiration of the insurance, and such costs of the insurance may be added to the principal amount of the Loans owing hereunder.

 

 

6.4

Compliance with Laws; Payment of Taxes and Liabilities.

 

(a) Comply, and cause each other Loan Party to comply, in all material respects with all applicable laws, rules, regulations, decrees, orders, judgments, licenses and permits, except where failure to comply would not reasonably be expected to have a Material Adverse Effect; (b) without limiting clause

(a) above, ensure, and cause each other Loan Party to ensure, that no person who Controls a Loan Party

(i)listed on the Specially Designated Nationals and Blocked Person List maintained by OFAC, and/or any other similar lists maintained by OFAC pursuant to any authorizing statute, Executive Order or regulation or (ii) a Person designated under Section 1(b), (c) or (d) or Executive Order No. 13224 (September 23, 2001), any related enabling legislation or any other similar Executive Orders; (c) without limiting clause

(a) above, comply and cause each other Loan Party to comply, with all applicable Bank Secrecy Act and anti-money laundering laws and regulations, (d) (i) file, or cause to be filed, all material federal and material state tax returns and reports required by applicable U.S. state and U.S. federal law to have been filed by it to be filed by any Loan Party and (ii) in respect of the taxes and reports described in the prior clause (d)(i), pay, and cause each other Loan Party to pay all such taxes and other material state or federal governmental charges as well as material claims of any kind which, if unpaid, could become a Lien (other than a Permitted Lien) on any of its property, except, in each case, any such taxes or charges (A) that are not delinquent or

(B) that are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been set aside on its books, (e) (i) except as would not, either individually or in the aggregate, reasonably be expected to result in a material adverse effect on the ability of the Borrower and its Subsidiaries, taken as a whole, to perform their obligations hereunder, file, or cause to be filed, all material foreign and other (non-state or Federal) material tax returns and reports required by foreign law to be filed by any Loan Party and (ii) in respect of the taxes and reports described in the prior clause (e)(i), except as would not, either individually or in the aggregate, reasonably be expected to result in a material adverse effect on the ability of the Borrower and its Subsidiaries, taken as a whole, to perform their obligations hereunder, pay, and cause each other Loan Party to pay, all material foreign other (non- state or federal) material taxes and other material governmental charges against it or any of its property, as well as material claims of any kind which, if unpaid, could become a Lien (other than a Permitted Lien) on any of its property, except, in each case, any such taxes or charges (A) that are not delinquent or (B) that are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been set aside on its books. For purposes of this Section 6.4 and Section 5.28, “Control” shall mean, when used with respect to any Person, (x) the direct or indirect beneficial ownership of fifty-one percent (51%) or more of the outstanding Equity Interests of such Person or (y) the power to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

 

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[Biolase] Credit Agreement #61304369

 


 

 

6.5

Maintenance of Existence.

 

Maintain and preserve, and (subject to Section 7.4) cause each other Loan